Treasury yields at the long end of the curve are once again rising today with the yield on the 30 year up 3.3 bps as of this writing. That is in the context of what has already been a dramatic move higher in yields of long term Treasuries. As we discussed in Friday’s Bespoke report, the ETF tracking longer-dated Treasuries, the iShares 20+ Year US Treasury ETF (TLT), fell 1% or more three days in a row last week (prices fall when yields rise).  Meanwhile, that move higher in long end yields has also been observed in other places of the world like Germany, as discussed in today’s Morning Lineup.

Given the steep rise in yields and hence a drop in the price of TLT, the ETF is trading at extremely oversold levels.  While it has come back slightly and is currently 2.66 standard deviations below its 50-day moving average, at the most oversold reading last Thursday, TLT traded 3.84 standard deviations below its 50-DMA. In its over 20 years of history, that is the most oversold reading on record.

As shown above there have only been a handful of other periods in which TLT has fallen at least three standard deviations below its 50-DMA as it did last week. In most circumstances, when an asset reaches such extreme levels of oversold, the thinking is that some upside mean reversion can be expected. However, the exact opposite has played out for TLT historically.  As shown below, across the prior seven instances in which TLT got 3+ standard deviations below its 50-DMA, the ETF was lower a year later four times.

Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market-related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.

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On This Day in History:
Oppenheimer’s Deadly Toy.  On August 6, 1945, the US dropped the first atomic bomb on Hiroshima, Japan.  The blast killed an estimated 80,000 people, and another 60,000 perished over the next year due to the fallout, but many military experts believe that more lives were saved as the bomb effectively ended the war.  Nuclear arms remain the number one issue on the geo-political stage, but the US is still the only country to use an atomic bomb in a military conflict.

Strange But True

Sailing Boat Rescued by the Götheborg (Götheborg of Sweden)
A small 8-meter sailboat sent out a distress call after losing a rudder, and much to the surprise of those on the vessel, the signal was received by an 18^th century, 50-meter, three-masted wooden ship, the largest in the world. To be lost at sea and encounter such a ship would surely make you think you had traveled back in time, as these sailors did! [Link]

Murder, Money and the Battle for a Pharmaceutical Empire (Bloomberg)
Barry and Honey Sherman, founders of drug company Apotex, are one of the wealthiest and most prominent couples to be murdered. In the ensuing investigation, details about their lives came to the surface and the empire they left behind. [Link]

Real Estate

A property owner returns to CT, finds a new $1.5M house on his land. Now police are involved (CT Insider)
A landowner in Fairfield, Connecticut had planned to pass on a plot of land he purchased years ago to future generations of his family. However, he was shocked to discover that the land had been sold without his knowledge in an elaborate scam, and a 4-bedroom house was built on it. This article details the nightmare situation and what is being done about it. [Link]

Rate-Locked Homeowners Nearly Twice as Likely to Not Consider Selling (Zillow)
Homeowners are experiencing what is called “rate lock” now that mortgage rates have risen significantly since lows in 2020.  Rate lock keeps homeowners with low rate mortgages locked into their homes in order to avoid taking on the additional cost of higher rates in a new home. The phenomenon is having some effect on housing supply, and therefore upward pressure on price. [Link]

Local Malls, Stuck in ‘Death Spiral,’ Plunge in Value (WSJ)
America’s regional malls have deteriorated in value while online shopping changes the landscape of shopping habits everywhere. Crystal Mall in Waterford, Connecticut is one example of what’s going on, a mall worth $153 million in 2012 sold in June at a foreclosure auction for $9.5 million. [Link]

CT home sells for $139M, sets new record (CT Insider)
A 50-acre estate on Greenwich’s coast sold for $139 million, the most expensive ever sold in the State, which will benefit the town and state nicely. Long rumored to be the home of billionaire Bridgewater founder Ray Dalio, the property features almost every luxury imaginable. [Link]

Technology

AI-assisted cancer screening could cut radiologist workloads in half (Engadget)
Using AI in mammogram cancer screening can reduce radiologists’ workloads by almost 50% without increasing false-positive results. The AI’s recommendations were found to be comparable to two radiologists working together, with a substantially lower workload. [Link]

First New Vogtle Nuclear Reactor Enters Operation, Making History (The Atlanta Journal-Constitution)
New nuclear reactors at Plant Vogtle in Georgia entered service this week, marking the first made from scratch in more than 30 years. Despite delays and cost overruns, the reactors are seen as a step forward for the industry and a crucial element for U.S. climate goals and energy independence. [Link]

Apple has joined Pixar’s push to standardize 3D content creation (The Verge)
Apple, Adobe, Pixar, Nvidia, and Autodesk have formed the Alliance to promote open standards for 3D tools and data interoperability. Pixar’s Universal Scene Description (USD) technology will be the focus of the alliance, enabling 3D content creation applications. Apple, with its upcoming Vision Pro mixed reality headset, views OpenUSD as crucial for the next generation of AR experiences. [Link]

Sports Memorabilia

Trading Card Wars Escalate With Antitrust Lawsuit Against Fanatics (WSJ)
Sports collectibles company Panini America filed a federal antitrust suit against rival Fanatics, alleging the latter’s aggressive entry into the trading card market violated federal antitrust law. Fanatics shocked the industry in 2021 by securing exclusive deals with major sports leagues and players’ unions, leading to concerns of market lockout and monopolistic behavior for decades. [Link]

10 Takeaways from The National Sports Collectors Convention (Action Network)
The National Sports Collectors Convention (NSSC) is a gathering collectors of sporting cards, autographs and other types of memorabilia. The industry remains strong as the all-time attendance record was broken with a significant number of young attendees. In person autographs are still popular, along with the growth of game-used items. [Link]

Government Spending

IRS aims to go paperless by 2025 as part of campaign to conquer mountains of paperwork (PBS NewsHour)
The effort to go paperless through the “paperless processing initiative” is being financed as part of an $80 billion infusion of cash for the IRS over ten years. By 2024, most people will be able to submit everything except their tax returns digitally, and by 2025, the IRS plans to process everything, including tax returns, digitally. [Link]

The worst US bridges are getting fixed (Construction Physics)
The article discusses the condition of US bridges, a good metric as the country’s infrastructure becomes an increasingly problematic issue. Despite the aging infrastructure and increasing traffic, the number of bridges in poor condition has steadily declined, while the sufficiency rating has improved. Overall, the focus on repairing or replacing heavily damaged bridges has made the bridge infrastructure safer, even as it gets older and handles more traffic. [Link]

Retirement

US workers estimate they need $1.8M to retire: survey (The Hill)
According to a survey from Charles Schwab, workers in the US believe they will need to save around $1.8 million for retirement, up 6% from last year’s estimate of $1.7 million. Inflation is fueling anxieties over savings, and stock market volatility is also seen as an obstacle. With the rise of AI, a staggering 95% of respondents prefer human professional advice over AI for financial planning. [Link]

History of Bonds

How bonds ate the entire financial system (The Financial Times)
This article is a short but surprisingly comprehensive history of tradable debt, which has built the foundations of not only capital markets but the physical and state infrastructure of the modern world. From a four-hundred-year-old dike to the aftermath of World War 2 and the modern colossus that is the global fixed income market, this article is everything you didn’t think you needed to know about bonds. [Link]

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Have a great weekend!

Equities have rolled over in the past week with selling hitting a pinnacle when the US government’s credit rating was downgraded by Fitch on Wednesday.  In spite of this, sentiment has not taken a hit. The latest survey from the AAII showed 49% of respondents reported bullish sentiment which compares to 44.9% the prior week. With nearly half of respondents reporting as optimists, bullish sentiment sits handily above its historical average of 37.5%.  In fact, this week marked the ninth in a row with a bullish sentiment reading above the historical average for the longest such streak since one that ended at 13 weeks long in May 2021.

The increase in bullish sentiment resulted in bearish sentiment to drop down to 21.3% which marks a 2.8 percentage point decline on the week and resulted in the lowest bearish reading since June 10, 2021 when it was 20.7%. Similar to bullish sentiment, that is the ninth week in a row with a reading below its historical average, and that is the longest streak since July 2021.

As a result to the increased optimism, the bull-bear spread ticked up from 20.8 last week to 27.7.  That is still below the recent high of 29.9 from two weeks ago, but reiterates how investors have an elevated degree of optimism.

Not all of the gains to bulls came from bears.  Neutral sentiment also declined this week falling from 31% to 29.7%.  That is in the middle of the past few years’ range.

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Initial jobless claims have been trending lower over the past couple of months, reaching a nearly six month low of 221K last week.  This week, claims rebounded rising 6K to 227K.  Albeit off the strongest readings from last fall, that remains a healthy reading on joblessness.

On a non-seasonally adjusted basis, claims are at historically solid levels even if they have come off their best levels. This week, claims dropped to 205K.  That is slightly above the readings from the comparable weeks of the year of the past few years (excluding 2020 and 2021 when claims were much more elevated).

At this point of the year, claims falling is normal as shown in the second chart below.  The current week of the year has only seen claims rise week over week 10.7% of the time. That is the sixth most consistent week of declines of the year. Claims will continue to face seasonal tailwinds in the weeks ahead, but that will begin to reverse as summer turns to fall.

Continuing claims also ticked higher in the latest week’s data, reaching 1.7 million. Although higher than 1.69 million the previous week, continuing claims have much more consistently been trending lower recently, and this week’s reading did in fact come in below forecasts of 1.705 million.

Have you tried Bespoke All Access yet?
Bespoke’s All Access research package is quick-hitting, actionable, and easily digestible. Bespoke’s unique data points and analysis help investors better visualize underlying market trends to ultimately make more informed investment decisions.
Our daily research consists of a pre-market note, a post-market note, and our Chart of the Day. These three daily reports are supplemented with additional research pieces covering ETFs and asset allocation trends, global macro analysis, earnings and conference call analysis, market breadth and internals, economic indicator databases, growth and dividend income stock baskets, and unique interactive trading tools.
Click here to sign up for a one-month trial to Bespoke All Access, or you can read even more about Bespoke All Access here.