1. Near record low yields on all durations. Click here for today’s Bloomberg rate quotes
2. The worst credit rating in U.S. history. Click here for information on the U.S. debt downgrade.
3. U.S. Inflation running at 3% for 2011 and 3.6% in 2012. Click here for the Bureau of Labor and Statistics inflation numbers. Over 6.00% when measured by 1990 calculation methods over 10.00% by 1980 calculation methods. Click here for more information.
4. A negative pre tax rate of return for all durations. Click here for today’s Bloomberg rate quotes
5. Nearly the worst economic fundamentals and budget deficits in history.
6. Denominated in a currency that’s lost over 30% of its value in the last 10 years against its foreign counterparts. Click here for the long term U.S. dollar chart.
7. U.S. debt now exceeding GDP. Click here for the story.
8. Rumors of China (the largest producer of gold in the world) hording gold with the intent of backing the Renminbi with gold, deregulating it and offering it as a new world reserve currency to replace the depreciating U.S. dollar. All it would take for the dollar and Treasuries to crash is for China to sell what they currently own. Click here for world production stats of gold since 1970. Click here for the story.
9. The G-20 calling for a new world reserve currency. Click here for the story.
10. The IMF calling for a new world reserve currency Click here for the story.
11. 420 of the world`s largest banks calling for a new world reserve currency. Click here for the story.
12. Little to no upside appreciation potential from falling rates on all durations (Treasury prices rise when rates fall and fall when rates rise) Click here for a Treasury calculator
13. Instrument risk excluding currency risk of holding a U.S. Treasury Note or Bond ranging from 5% to over 30% for example on the 30 year Treasury it’s greater than 30%. Click here for the chart each point equals $1,000 per hundred thousand in face value.
14. The uncertainty of an election year.
15. A Fed chairman who’s been wrong more than right. Click here for a video and watch him tell himself in 5 separate CNBC interviews.
16. A Fed chairman who can’t remember under oath who the Fed lent over half a trillion dollars to. Click here for the video.
17. A Fed chairman who closed his speech as a Fed Governor May 20th 2004 when rates were at 1% with “a significant portion of the financial adjustment associated with the tightening cycle may already be behind us” less than 6 weeks latter starting June 30, 2004 the FOMC began raising rates 17 consecutive times pushing the Fed Funds rate from 1.00% back to 5.25% by June 2006. Click here for the speech see his closing statement, click here for historical Fed Funds rates. Buyers on the open market won’t buy unless they’re compensated for the instrument, currency and inflationary risks of holding a U.S. Treasury.
18. As yields rise and Treasury prices fall it could potentially fuel additional treasury selling accelerating the move lower in Treasury prices and higher in rates. This selling in the past has lead to aggressive U.S. dollar sales as investors liquidate U.S. debt they own, sell dollars and purchase higher rated, higher yielding debt in a appreciating currencies. Why would someone in China buy AA+ debt paying 0.08% in a depreciating currency when they can earn 4.15% in AAA rated debt in an appreciating currency? Australia’s debt is currently rated AAA paying 4.15% click here for today’s Aussie rates. The Australian dollar has also doubled over the last 10 years against the U.S. dollar click here for the long term Australian dollar chart.
19. There appears to be no hope is site for meaningful budget deficit reductions setting the stage for further U.S. debt downgrades similar to August of 2011 (from AAA to AA+) further debt downgrades would pressure U.S. rates to higher, click here for the CBS story and video. Click here for a U.S. budget simulator.
20. Should the Fed decide to do a QE3 or 4 , the dollar would devalue further, wholesale commodity prices would double again, inflation would aggressively engage and rates would rise, click here for the “what if” video. Click here for the long term CRB index chart showing wholesale commodity prices tripling over the last 10 years.
21. Should the economy recover rates will rise. Fed officials are divided on the strength and speed of the recovery click here for the MSNBC story. In Bernanke’s career he’s been wrong more than right click here for a video and watch him tell you in 5 separate CNBC interviews starting in 2005 that there is no housing bubble, we’ll see growth in 2008 and that subprime mortgages are not problematic. What can you expect from someone who under oath can’t remember who the Fed lent 553 billion to click here for the video. The last time rates we’re at historic lows Bernanke gave a speech on May 20th 2004 his closing statement was “a significant portion of the financial adjustment associated with the tightening cycle may already be behind us” less than 6 weeks latter starting June 30, 2004 the FOMC began raising rates 17 consecutive times pushing the Fed Funds rate from 1.00% back to 5.25% by June 2006. Click here for the speech see his closing statement, see the chart above for confirmation of the move.

In my opinion with good, bad or the same economic news once Fed intervention ends this June I believe rates will start moving higher in 2012 with the move accelerating in 2013-2014 as economic fundamentals engage. I can think of no credible arguments that would justify rates remaining near zero once the unprecedented Fed intervention subsides.

At the height of the great depression in 1933 the dollar was backed by gold, the U.S. had deflation of 10% yet short term U.S. interest rates were still above 1.00%, 10 year rates above 3.3% versus 2012, 0.08%, 10 year at 2.2%, click here for historical treasury rates.

In my opinion near zero interest rates with inflation greater than 3.00% is artificial, temporary and unsustainable once the unprecedented Fed intervention subsides.

Program Benefits ·

Minimum unit sizes $25,000 to $250,000 USD or major currency equivalent; accounts can be established and maintained in any major currency. Click here to open an account online in 5 minutes. All rate programs are approved for U.S. I.R.A.’s. ·

Accounts can be set up to have my team automatically establish, hedge, maintain and roll all positions. As positions appreciate my team can automatically adjust hedges to protect profit or should they depreciate adjust hedges for a better entry. ·

Accounts are fully segregated, heavily regulated and held at PFG (700 offices, IB’s, CTA’s doing business in 80 countries). Click here for information on the Financial Safeguard System, click here for rules on segregation of funds, click here for information on PFG. ·

Risk is objectively defined on every trade and for the duration of every trading period. Click here for our current March 2013 Fed Funds risk reward spreadsheet. ·

Positions and balance are updated online every 3 seconds. ·

Account liquidity without penalty in portion or all is 2 to 48 hours in any currency. ·

Zero cost to open or close your account. ·

Gains for U.S. investors are taxed under the 1256 tax rule (60% long term gains 40% short term gains regardless of trade duration, click here for information on the 1256 tax rule). Filing requires a one page 6781 form click here for a copy, foreign investors are exempt but require a W-8 to be on file click here for a copy.

If you have any questions or need additional information please call Russell or myself.

Regards,
Peter Catranis CTA, CPO, IB, AP
Accredited Investment Management
Wells Fargo Tower 13th Floor
2030 Main Street, Irvine CA 92614
USA +949-376-8020
US Toll-Free 800-994-5757
Mobile & Texts US+949-302-9652
Fax US+ 949-260-4964
Email peterc@catranis.com
Skype Peter.Catranis

Russell Tanner Allocations & Trading
311 W. Monroe, Suite 1300
Chicago, Illinois 60606
USA +312-775-3561
US Toll-free 800-634-8905
Mobile & Texts US+312-852-0201
Fax US+312-775-3095
Email Rtanner@pfgbest.com

Risk Disclosure

The risk of loss in trading commodities can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage that is often obtainable in commodity trading can work against you as well as for you. The use of leverage can lead to large losses as well as gains. In some cases, managed commodity accounts are subject to substantial harges for management and advisory fees. It may be necessary for those accounts that are subject to these charges to make substantial trading profits to avoid depletion or exhaustion of their assets. The disclosure document of a commodity trading advisor ("CTA") contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA.

The risk of loss in trading foreign exchange can be substantial. You should therefore carefully consider whether such trading is suitable in light of your financial condition. You may sustain a total loss of funds and any additional funds that you deposit with your broker to maintain a position in the foreign exchange market. Actual past performance is no guarantee of future results. Simulated performance results also have certain limitations unlike actual performance records; simulated results do not represent composite trading. Also, since trades have not actually been executed for this composite, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity, simulated trading results, in general are also subject to the fact they are designed with the benefit of hindsight. No representation can or is being made that any trading system will, or is likely, to achieve profits or losses similar to those shown in this simulated performance record.

The performance records have been calculated in a manner we believe to be reasonable and are based on the respective leverage factors intended to be used. Prospective investors must recognize that any simulation of a hypothetical record, even when based on actual trading systems, with qualified trade execution, has inherent limitations. We believe that the records as presented should be of interest to investors in determining whether to participate, such rates of return should by no means be taken as an indication of how the system will perform or would have performed, even given the same trades. Any performance record compiled from individual performance records of any trading methodologies has certain hypothetical and artificial characteristics and must be evaluated accordingly.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM. ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.