Selasa, 20 Mei 2025

"Bond Vigilantes" are about to CRUSH your portfolio

Don Kaufman here.

Let me say this straight: everyone's looking at the wrong damn thing.

The S&P 500's rally, tech stocks flopping around, or some shiny AI play that's got retail traders foaming at the mouth. But none of that matters. If you're not watching the bond market, you're missing the entire game.

I'm not here to sugarcoat it—bonds are falling apart, and the ripple effects could hit every corner of this market.

Stocks, housing, credit—everything. And yet, no one's talking about it. CNBC isn't plastering it across their screen. Retail traders aren't losing sleep over it.

But trust me, you should.

The Bond Market Is Screaming, and No One's Listening

While everyone else is busy talking about Tesla or Nvidia, here's what's really happening: the bond market is absolutely tanking. Yields are climbing faster than most people realize, with the 10-year sitting at 4.5%. And if you think that's no big deal, let me spell it out for you—this is the highest level of yields we've seen in years, and it's going to start breaking things.

You know what higher yields mean? It means higher borrowing costs for everyone—whether you're trying to buy a house, finance a car, or keep a business running. It means the government's debt, which they roll over by issuing more bonds, is about to get a whole lot more expensive.

We're talking about trillions of dollars in debt that's coming up for renewal at these higher rates. And the Treasury is going to have to roll that debt into higher interest payments. That's not just a problem—it's a ticking time bomb.

The Biggest Risk: No One's Watching Bonds

Here's what's blowing my mind: the retail world doesn't care. They're still chasing speculative stocks, buying the dip in Apple, and pretending that the S&P's recent rally is going to keep going forever. Meanwhile, professional traders—the people running market-making firms and hedge funds—are glued to the bond market.

You know why?

Because bonds drive everything. The bond market is bigger than the stock market, and it's where real risk lives.

And right now, risk is everywhere. The bonds are selling off, yields are climbing, and no one seems to be asking what happens next. But let me tell you what happens next: higher yields are going to crush the housing market, choke off credit, and start putting real pressure on financials.

Bond Vigilantes and the Treasury's Dilemma

We're starting to see what I like to call bond vigilantism—traders selling bonds so aggressively that it's forcing yields higher and higher. It's like they're daring the Treasury and the Fed to do something about it.

And here's where it gets really interesting. The Treasury Secretary is out there talking about "influencing" interest rates. Translation? They're going to have to intervene.

They can't let the bond market completely unravel because, quite frankly, the US government can't afford to pay these higher rates on its debt.

But here's the kicker: retail traders are still asleep at the wheel. They're not paying attention to any of this. They're too busy chasing quantum computing stocks and arguing over whether Nvidia's the next trillion-dollar company.

Meanwhile, the bond market is quietly falling apart, and when it breaks, it's going to drag everything else down with it.

How I'm Trading This

So, what am I doing about it? I'll tell you. I'm selling bond puts because I want to establish a monstrous position in bonds.

Think about it: if bonds keep falling and yields keep rising, the Fed and the Treasury are going to be forced to step in.

And when that happens, bonds are going to rally hard. That's the setup I'm playing for.

This isn't a trade for the faint of heart.

If you're not comfortable managing risk, stay out of it. But for me, this is one of those rare setups where the risk/reward is just too good to pass up.

Don't Miss the Big Picture

Here's the bottom line: the biggest risk in this market isn't in the S&P 500 or Tesla or Nvidia. It's in the bond market. And if you're not paying attention, you're going to get blindsided when this thing breaks.

I know it's not sexy to talk about bonds. No one's making TikToks about the 10-year yield. But if you want to understand where this market is headed, you need to follow the money—and the money is in the bond market.

So, while everyone else is out there chasing momentum and ignoring the bigger picture, I'm putting my focus where it belongs. Because when it comes to trading, the crowd is almost always wrong.

And in this case, the crowd doesn't even know what the real risk is.

Pay attention, or get left behind.

To your success,

Don Kaufman

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