Cramer Last Night -- Very Coherent on Selling 30-Year and 10-Year US Bonds Before the Blood-Letting in Bonds, and Where to Put the Money

Jim: We have got a real dilemma in tonight’s Sell Block… I think the big run in U.S. Treasuries has ended… they have moved up enough and it is time for you to sell 10 year and 30 year treasuries… that is right… I am putting one of the safest investments on earth into the sell block tonight… a so called safe haven for anyone who wants to protect their cash is getting less and less safe… let’s go over why… first of all I suspect the return of inflation… look, it is not necessarily some bad thing, it is not some Phimar republic fearing inflationist talk… but it is definitely bad for those who own treasuries… the most popular investment in the world...


Last night I talked about how PVC piping, corrugated boxes and bricks were coming back… roaring back in price… these are the building blocks of the economy… the prices had all been going down… now they are reversing… so once economic growth kicks in we are bound to see some inflation… the higher the inflation goes the less attractive the yields on treasuries become in comparison… and the security erodes in value… and I believe strongly that we have seen the trough and treasury yields… which of course because of the ways that bonds work, means the peak in prices for bonds… and that is because the economy is coming back… we have had a steady drum beat of positive economic news… today’s decline in jobless claims, the rising housing starts… these are just the latest in a long undeniable line of pieces of data that make me believe the recovery is for real.Inflation plus recovery means that sooner or later the Fed is going to have to start raising rates… and that pushes treasuries lower… I also want the US government to issue a trillion dollars in 30 years bond… I wish that they would do that… cause they have got to pay for all of this deficit financing… and they are probably not… but something like that, a giant, giant just crushing amount of debt is going to send them down in price… if anything will.I think the 30 years treasuries, which currently yield 4.2%… will rapidly go to 5% or higher within the next few months because of this mountain of federal debt… and I am promising… I am promising you that you will get hammered… courtesy of the endless auctions that the Treasury must run to finance the deficit… how about this… 10 year treasuries yielding 3.4%… right here, right now I am calling them perhaps the most overvalued securities in the world… you heard me… the most overvalued securities in the world is the 10 year treasury.So here is the dilemma… look, I could tell you to take a look at the master limited partnership that we talked about earlier… the Kinder Morgan Energy Partners (KMP)… or I would tell you to be in Enterprise Products Partners LP (EPD)… these almost yield 8%.. they are obviously better values than treasuries… but most of you buy treasuries because you want to keep your money safe… we talk about them as being the First National Bank of Seeley, with a better yield… however, now that I think we are about to come down… now, right now, it is time to sell the 10 year and 30 year… but you have to be very careful about where to put your cash when you sell them… this is a tough environment for those of you who are focused on capital preservation… just keeping your money safe and having it grow slightly faster than inflation… you cannot swap out a long term treasuries, any more, into ultra safe money market funds… because starting tomorrow… they are no longer ultra safe.Don’t believe me?… how about this, the Wall Street journal, take a look at page C3... “Low Yields Dog Money Funds As Guarantee Is Set To Expire”… that is right… tomorrow the government back stop on money market funds comes off… they will no longer have the protection of the FDIC… hey listen, the yields stink anyway… without the back stop I do not think that it makes sense for you to park your funds in these… you want something with FDIC protection for true, for real… you want Marathon Man style safety… as of tomorrow, money funds no longer rate Marathon Man status… which means if you want to keep your cash safe… and you do not want to get hurt by what I think is going to be a giant skyrocket in rates… you have got to accept the low rates of CD’s right now.It is vital that you keep your cash in certificates of deposits for the next 18 months… that is the length that I think before the rates get so high that we are going to go back… without the 10 year or 30 year treasury or money market funds as favorable parking places… I am telling you that CD’s, even with those low rates… are the best yields that you are going to get right now… even as the deal is not a very good one… CD’s do not have to be terrible… you can try to maximize your yield… and to do that you have to compare rates from national banks with the ones offered by local or regional ones near where you live… as well as smaller lesser known banks that offer the best rates that are insured by the FDIC… I cannot say that enough… insured by the FDIC.There are a number of different search tools on the internet for this.. I like the unbiased ones… while no one site covers everywhere… I always like to start with the one that I know I got involved in because it is so honest… it is called Banking My Way… bankingmyway.com…. to look for good rates on CD’s… it is a site that we bought on TheStreet.com where I am Chairman… we wanted to find some place, some place that you get the best rates that the FDIC backed… cash may not be king right now… but we need to keep a portion of our money in something safe… even when we are in the land of yes, a 1000 bull dances… so why not upgrade cash from pawn to maybe knight… by making sure that you are getting the best return that you possibly can… while still having the protection of Sheila “Sainted” Bair at the FDIC.Look, I wish that I could give you a better play on the end run in treasuries… I am putting them in the sell block… I wish that I could say, hey, here is a great way to profit from the coming decline in bonds… now, at one point I would have recommended… I would have examined the ultra short treasury ETF’s, called the TBT for 20 plus year treasuries… or the PST for 7 to 10 year treasuries… but just like all the other leveraged ETF’s that I have trashed on this show… these are not a good way to play long term treasuries… they do not do what most people think they do… I hate these things… they are a travesty… I have been crusading against these ETF’s for many reasons… but the thing that makes them so terrible… is that they only effectively track daily changes in price… and then they rebalance at the end of the day… that rebalancing means their longer term performance has more to do with the volatility of treasury prices… then the actual direction… cause we are trying to short them… basically there is not good ETF that lets lever up and bet against treasuries in a significant way… that actually works the way that it should.Here is the bottom line…
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Bottom Line: Look, I know this is a stock show.. but I am making this point… it is very important… it is really heartfelt, and you have got to listen to me… the run for treasuries that I have believed in for a very long time is over… I am calling the top in treasuries… right here, right now at this moment… that is right it is time to sell, sell, sell your 10 year and 30 year treasuries… it is time to shorten up… you need to start buying CD’s… FDIC protected CD’s… that is our preferred place for cash until rates go so high that we will be lured back into the interest market.