{"id":80240,"date":"2026-09-04T17:26:20","date_gmt":"2026-09-04T21:26:20","guid":{"rendered":"https:\/\/blog.t3live.com\/?p=80240"},"modified":"2026-09-04T17:26:20","modified_gmt":"2026-09-04T21:26:20","slug":"knowing-when-to-press-your-bets","status":"publish","type":"post","link":"https:\/\/blog.t3live.com\/2026\/09\/04\/knowing-when-to-press-your-bets\/","title":{"rendered":"Knowing When To Press Your Bets"},"content":{"rendered":"

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Last week I laid out my case for a <\/span>top in long rates on US Treasury Bonds<\/span><\/a>. This week, I\u2019m growing more confident that an important low in the price of US Bonds has been made. However, I\u2019m still a fair weather fan, so I\u2019ll be out in a heartbeat without remorse if my stops are hit.\u00a0<\/span><\/p>\n

It\u2019s been my view that we are in <\/span>the contraction phase of the business cycle<\/span><\/a>, and if that view is correct, we should see growth and inflation expectations start to come down for 2027. This shifting dynamic is what can finally put a bid under US Bonds. This is because there will always be demand for income.\u00a0<\/span><\/p>\n

\nhttps:\/\/blog.t3live.com\/wp-content\/uploads\/2026\/09\/Cycle-Explanation.mp4<\/a><\/video><\/div>\n

When I was running an equity portfolio for a small RIA shop, I had to stretch way out the risk curve far beyond where I was comfortable playing to get the portfolio yield just barely into the 3% figure. I was buying foreign telecom OTC equities to get there. This was during the financial repression of the QE era, and it was not a good time to be a dividend portfolio manager. <\/span><\/p>\n

Today, we are being offered higher yield, even above what I had to stretch for back then, <\/span>in a money market<\/span><\/i>. You can lock in way higher than that if you are willing to extend duration a decade or more. The TLT, my preferred way to play the top in yields, pays a monthly div of \u00a233, about 4.7%. This may not look exciting compared to the gains you can get from a well placed equity trade, but believe me, 4.7% return with no risk is nothing to shake a stick at. The unfortunate reality is that at the moment, there is nothing more attractive than US Bonds for my irreplaceable capital.\u00a0<\/span><\/p>\n

I\u2019ve been in about 75% cash since March, 2026 when I peeled off the last of my gold miners I was willing to part with (I\u2019ve still got my core position in the big 5 miners) so I\u2019ve been looking for another core position in which to allocate. Stocks are just not attractive other than trades right now because they are all trading at about 20x pretax earnings across the board; no matter what sector you look at, every single stock worth owning trades at basically 20x what you can expect it to earn every year. <\/span><\/p>\n

The only exceptions are the oils like XOM and CVX which trade about 15x and my favorite fertilizer, NTR, which trades about 12x what I estimate is an average of earnings over a cycle. These names can still offer potential for <\/span>reward with the small chance of an energy or grain price spike<\/span><\/a>, but the risk is shifting to the downside as the Iran conflict seems to be nearing a conclusion, or <\/span>at the very least, a de-escalation<\/span><\/a>. <\/span><\/p>\n

Any way I analyze the attractiveness of stocks for ownership, I come up lacking any justification for anything other than renting specific names for a trade. In an environment like this, it\u2019s best to just stick with the easy trade, and for me, TLT is the easiest one out there.\u00a0<\/span><\/p>\n

If the lows of this week hold in TLT, then my focus will shift towards deciding where to add. Proper speculation requires only averaging up, never down. Stan Druckenmiller said the key to his success was forming a trade idea, putting on a position, then really stepping on the gas and levering up when his position started to work. I want to apply the same logic to TLT. The first step is seeing the TLT hold the lows of this week at about $81.75. The next step would be to see some strength above $83. A weekly close above $83 on strong volume would be some indication that it would be time to press on TLT with tight stops below $83.\u00a0<\/span><\/p>\n

This TLT play feels a lot like my gold trade that won me the ability to trade for myself, but this time, I\u2019m going to apply the lessons I learned from that campaign. I did almost everything wrong during that speculative campaign: I averaged down, didn\u2019t have a trade plan, didn\u2019t use stops, had no risk control, etc. The only thing that made the trade work out for me was size. I was 90% long in one sector because I was confident in my analysis. I used 8th grade math to plot the dollar value of US debt going back 50 years, and used an R-squared regression to get a y=mx+b equation. I plugged in the year 2030 for \u201cb\u201d, and got $45T for our debt. I then took the current portion of foreign held debt outstanding at 20%, and I asked, if even 1% of that dollar value shifts to gold, what would the supply and demand balance look like? It turns out, that at the time I performed this basic analysis in 2023, the new demand for gold would be 4.5 tons at the $2,000 price gold was then, and new supply would be only 2 tons by 2030. It was a no brainer, and the trade worked out.\u00a0<\/span><\/p>\n

This time around, I\u2019m going to still rely on my analysis that we\u2019re in the contraction phase which means growth and inflation should be coming down, but I\u2019m going to adhere to strict risk controls to put on my TLT allocation. Each time I see a higher low hold, I\u2019ll treat that as a new tactical spot to buy stock to add to my strategic core position. Like Druck\u2019s playbook, if the trade starts to work, then and only then will I add.\u00a0<\/span><\/p>\n

The reason I can be so confident in my analysis that we are in the contraction phase, is because all the signs I\u2019ve been looking for are appearing. I\u2019m relying on signs to form a checklist approach to pinpointing the turn in the cycle rather than hard data points because a data-driven, statistical modeling approach is notoriously wrong at turning points. Modeling is only good when you\u2019re in the middle of a cycle and you want to determine trend or degree of economic activity. That is an approach for institutional money, and I think it has too many flaws to be relied on for the type of speculation that lies within my wheelhouse.\u00a0<\/span><\/p>\n

For myself, figuring out the next big trend where I can park capital and ride it out is the only pursuit worth my effort. In that vein I\u2019ve developed a checklist to determine the likelihood we are at the contraction phase of the economic cycle:\u00a0<\/span><\/p>\n