Seventy-six trombones led the big parade

With a hundred and ten cornets close at hand.

They were followed by rows and rows of the finest virtuosos,

the cream of ev’ry famous band.

Seventy-six trombones caught the morning sun

With a hundred and ten cornets right behind

There were more than a thousand reeds springing up like weeds

There were horns of ev’ry shape and kind.

There were copper bottom tympani in horse platoons

Thundering, thundering all along the way.

Double bell euphoniums and big bassoons,

Each bassoon having it’s big, fat say!

There were fifty mounted cannon in the battery

Thundering, thundering louder than before

Clarinets of ev’ry size

And trumpeters who’d improvise

A full octave higher than the score!

– “Seventy-Six Trombones,” The Music Man

The Dow inched higher yesterday. This morning, gold is down about $19 to $1,394 an ounce – about where it traded on Monday.

After telling readers how awful it was, now the mainstream press is back to neutral on gold. Barron’s recently ran an article titled “Gold Regains Its Glitter.”

Markets make opinions. Gold is up about 17% from its June low. Opinions on it are becoming more favorable.

But you ain’t seen nothin’ yet. The central banks of the major developed economies are engaged in massive debt monetization (aka “QE”).

If they all start to taper their bond buying, they risk resurrecting the calamity they’re trying to avoid – a deflationary depression. (At least in their minds.) So, they’ve got to keep going. The markets… and the economy… depend on it.

You wanna see something really glitter? Just wait!

Play the Music!

You’ll be pleased to hear that our 93-year-old mother is holding up well. We weren’t sure she should make the trip to France with us in the summer. She seemed so frail.

But she wanted to go, so we made it our goal to get her there and back without mishap. This we accomplished (with a sigh of relief) when we wheeled her into the Dulles International Airport arrivals area a couple of weeks ago.

Our mother is a delight. She has slowed down in the last few years. Her thoughts and conversation are slower than before. She walks as though she were not going anywhere.

But her mind is clear. She does crossword puzzles in French – a language she doesn’t speak – to keep her brain sharp. But she’s becoming eccentric. When she is alone in the house, she puts on The Music Man. She watches the movie over and over.

I’m sure you know the story, dear reader. A con-man comes to a small town in Iowa. He makes his money by convincing the yokels they need a marching band… and then selling them the instruments and the uniforms.

This seems like such an innocent, respectable flimflam… and so hard to pull off… you can’t help but feel sympathy for Robert Preston in the male lead.

He starts by convincing the citizens of River City that their town is bound for Hell, thanks to falling moral standards. Specifically, young people have begun hanging out at the pool hall… and using hip slang such as “swell” and “so’s your old man.”

What can be done to counter this dark, satanic evil? Well, the town needs something uplifting… something that makes people proud of their town and of themselves – a marching band!

The plan was working well. He had his orders. He had his money. The uniforms were arriving from Des Moines. It was time to skedaddle. But something happened. He succeeded too well.

The people of River City had bought into the dream of a marching band. They had become excited by it… more confident in themselves and their future. Yes, dear reader, the music man seemed to be performing a miracle – like making the lame dance like Fred Astaire and the dumb sing like Pavarotti.

But the biggest miracle happened not to the citizens of River City, but to the music man himself. The local spinster librarian came to believe… not just in brass and drums… but in him.

And for the first time in his life, he saw himself as something different… something better, a poor sinner who had been redeemed by dreams and love.

Grace, beauty, love and truth – even in Iowa.

That must be what our mother likes so much about the movie.

Market Insight:

A “Rolling Top” in Treasurys?

From the desk of Chris Hunter

Bill reckons three major markets have reached inflection points: US stocks, Treasurys and gold.

Specifically, he reckons that US stocks are in a long, drawn-out process of topping out… that the Treasury market has already topped… and that gold has carved out a bottom.

We’ve looked at US stocks and gold lately. So let’s turn our attention today to the Treasury market.

Here’s a chart of the iShares Barclays 20+ Year Treasury Bond ETF (NYSE:TLT). This exchange-traded fund tracks the price performance of Treasury bonds with an average maturity of 28 years.

Remember, with more time to maturity, longer-dated bonds are more susceptible to changes in the rate of inflation. If there is a top forming in Treasurys, this is where it will likely show up first.

As you can see, TLT has formed a big, ugly rolling top over the last 20 months or so.

Now, let’s look at a second chart of the same fund over the same period. In this chart, I’ve added in a basic trend line to give you a better picture of what’s going on.

TLT sells for $106 a share at writing. But, as you can see, it could fall to $95 a share – a further 10.4% drop – and still not disrupt its major uptrend.

I agree with Bill’s “big picture” thinking on the Treasury market. Yields have nowhere to go but up. And because prices move in the opposite direction to yields, that’s bad news for Treasury bond investors.

But I’d like to see TLT break below support at $95 before I’ll say the long uptrend in bond prices (and the long downtrend in yields) is officially over.