Phil Grossfield's Blog

21:16 Bitching-Free.  I was frustrated at 21:16 into my spin class on Sunday morning. I looked down at the elapsed time on my spin bike…only 21 minutes and 16 seconds had elapsed…nearly 40 minutes to go. And the spin instructor was driving me crazy…she wouldn’t shut up. Stop talking so much! The ideal spin instructor plays great music, yells at the right moments, and doesn’t fill every single second in the 60-minute class with her voice. This instructor was failing in all three respects. At 21:16 I was frustrated…angry even…in my head I was bitching. Then it occurred to me…maybe I was feeling this way because I had 2 glasses of wine and an aggressive homemade Manhattan the night before. Maybe I was the one failing…not the instructor. And then I think I said out loud, “what the hell is wrong with me?” What was I complaining about? How fortunate was I to belong to this club and to be in a class with 50 other motivated people?  And why was I bitching about my instructor who was up at the same time on a Sunday morning as I was…and who was expressing her passion to get the most out of her class?  At 21:16 I changed my focus, I changed my thought process, I refocused my energy into the task at hand…getting a great work out…bitching-free.  That’s the thing about exercise…it refocuses your energy, physically and mentally. After class I thanked the instructor for a great workout and then hit the steam room. Ahhhhhhhhhhhhhhh…….

My Market Watch.  Bonds Up +5bps. Prices Improved.  This morning the 30-year Fannie Mae bond is up +5bps and is trading exactly on a ceiling of resistance.  There are not a lot of pressing economic reports this week…it shouldn’t be volatile. Did I just type that?!  Now I’m nervous!

The bond is trading exactly on a ceiling of resistance. Using my Glass Elevator analogy, the bond price was going up and stopped at a ceiling…the glass elevator is stopped…the elevator doors are open…and we’re wondering whether the elevator is headed up to the next ceiling or down to the floor below. If it heads up then we could see improved pricing. If it heads down pricing could get worse. With little going on today, or this week for that matter, I think rates will do nothing today. I think the elevator is just staying put.

How to think about the Bond Glass Elevator.  Think of the bond price as a glass elevator that goes up and down. As the elevator reaches the next ceiling up there is a good chance it might stop and then head back down. This is how traders think about it…they might decide its a good time to sell since the elevator is as high as its going to get. But if the elevator goes through the ceiling and continues going up, then there is a good expectation it will keep going up until it reaches the next ceiling.