Everyone's buying bonds for Fed cuts. I'm shorting them. Here's why.

Don Kaufman here. 

While everyone's loading up on TLT expecting 50 basis point cuts and mortgage relief, I just put on a bearish spread. Already up 18%.

Here's my contrarian thesis: The 10-year is going to 4.5% in the next month, regardless of what Powell does.

The Bond Vigilantes Are Coming Back

Look, people get confused about this. The Fed controls the short end of the curve. 

They can cut the Fed funds rate all they want. But the long end? That's where the market makes the Fed pay.

And right now, the market's about to make them pay big time.

Why 4.5% is Inevitable

The 10-year just bottomed around 4.2%. Everyone thinks that's the floor because "rate cuts are coming."

They're missing the bigger picture.

We've got sheer stupidity happening across the entire economy. Everything is completely financialized now. 

You want proof? 

The United States government is about to buy part of Intel. They're going to "make chips, baby" and charge 15% export fees.

This isn't monetary policy anymore - it's financial desperation.

My Most Recent Win 

Yesterday I bought the September 19 87/84 TLT put spread, and today I closed it out at $1.15 for a 30% gain. 

It was based on pure directional conviction based on what I see happening in the bond market.

The Bigger Picture Nobody's Talking About

Here's what everyone's missing: more degenerative borrowing sounds great until it doesn't.

The spending is huge. Tariffs aren't enough. Someone has to pay, and that someone is bond holders when rates spike higher.

Even if the Fed cuts, the market doesn't have to care. They can lower the short end, but I'm not sure they can control the long end anymore.

What Happens Next

In 18 months, I think we're going to yield curve control in the United States. There's no way around it.

But between now and then? Bond vigilantes are going to sell these things into oblivion first.

The way I see it: bonds sell off, rates spike to 4.5% or higher, then eventually they'll have to step in with yield curve control when borrowing costs get too insane.

Bottom Line

Everyone's positioned for the Fed to save the day with rate cuts. I'm positioned for the market to tell the Fed it doesn't matter.

We're caught in an incredibly difficult time where the old playbook doesn't work anymore. When everything's financialized and the government's buying pieces of companies, traditional monetary policy breaks down.

That's when bond vigilantes wake up.

To your success,

Don Kaufman

P.S. - Obviously, you don't have to take any trade you don't like. But when I see this kind of setup - everyone positioned one way, fundamentals pointing the other direction - that's usually where the money is.

P.P.S.- The TLT trade I closed today for 30% gains in 24 hours? It’s part of my 3TW service. If you’re not a member, click here to join.