As of 10:45 this morning Bloomberg is displaying a 1.49% yield on the 10-Year treasury bond. (Story from CNBC
) The equity market doesn’t appear to like it very much. If you own intermediate term bonds (5 year duration) you’ll loose a bit, but equity investors may take a much larger hit if rates continue to rise. (conjecture, of course).
Running into equities to avoid the bond risk might amount to burning down the house to get rid of the mice. Keep in mind that as your bond / bond fund loses paper “value”, the rate of interest you are being paid increases. So it’s a 2-way street for those on the short-intermediate end of the curve.
Good thread from @Sven
re Munger’s take on bitcoin. I tend to agree with Charlie. https://www.mutualfundobserver.com/discuss/discussion/57794/munger-on-bitcoin
Yesterday GameStop’s stock price rose over 100% in a single day. That kind of speculative erotism amounts to gambling. I also fear it points to a lot of “froth” in other areas / asset classes. Which ones? That’s the puzzle.
Logged into my Fidelity account and fully expected to see a 2-3 percent drop... I was up .26 percent for the day. Quite surprised about that. Small Caps holding up. Biggest funds negative were ARTYX and FSEAX - both down about 1 percent for the day.
Joe Duran with Goldman Sachs was on with Maria Bartiromo this morning. It was a fantastic interview! I cant find it anywhere online otherwise I would link it. Perhaps it will be out in a day or two or it will be on a twitter feed. His summary of 2021? Expecting an 8 percent gain in S/P for the year. Stimulus and Fed accommodating... means a great year for equities, don't hold Bonds unless they are very short term etc. etc. Stimulus is pumping a ton of money into the economy. That money will be spent. That will lift all ships.
Good interview in this week’s Barron’s with Felix Zulauf re various forces at work in today’s markets.
Stay Safe, Derf
In the past, many market pundits predicted 8% - 10% gains for a specific year but market returns rarely fall with this range. If all ships will be lifted, where will customers moor their yachts?
ARTYX -3.36 FSEAX -2.08 Any way you look at it , Thursday was a downer !
Stay Safe, Derf
I was referring to stock market predictions for a single year.
I've observed these predictions often fall within this narrow range regardless of the environment.
By Daily Insight Research - BCA Research (excerpt from Barron’s March 1, 2021 issue)
“We recommend that multi-asset investors underweight bonds, especially Treasuries. We expect that the clamor for bigger government will contribute to a secular bear market that could rival the one that persisted from the 1950s to the 1980s. Within Treasury portfolios, we would maintain below-benchmark duration and favor Treasury inflation-protected securities over nominal bonds, at least until the Fed signals that its campaign to re-anchor inflation expectations higher has achieved its goal. Gold and/or other precious metals merit a place in portfolios as a hedge against rising inflation, and other real assets, from land to buildings to other resources, are worthy of consideration, as well.”
(No link. I’m a Barron’s subscriber.)
If inflation remain less than the 2% target, what is the value of holding gold as a hedge against inflation?
“If inflation, big government, and organized labor come back from the dead, globalization loses ground, regulation expands ... tax rates rise and become more progressive, than the four-decade investment age that Reagan and Volcker helped launch may be on its last legs.”
- Goodby Reagan and Volker
Likely the article cited was penned several days prior to being published. Over those few days gold’s price stumbled from around $1800 (start of week) to $1730 at yesterday’s close. The miners fell about 5% Thursday and another 3-4% Friday.
IMHO - It’s too erratic to serve as a reliable inflation hedge. Those who promote buying gold seem to be of the belief that the Fed’s stimulative measures along with massive government spending will eventually lead to a cataclysmic fall in the dollar’s value.
Whoa. A lot to unpack there. But thanks for posting more.
The amount of time I spend here seems to *mostly* coincide with MLB spring training, and my yearly rearrangement of the deck chairs in my IRA. So I'm not going to spend too much time getting into their analysis.
But I hear the GOP wants to position itself as the workingman's party.
I unloaded bonds for my own reasons.
“But I hear the GOP wants to position itself ... ” - OK
Among other things I was thinking about putting Reagan and Volker in the same basket after packing the 50's and 60's into the same bear market as the 70's. And that whole four decade bull was pretty much treading water for 13-14 years after the dot com bust. At some point the market became Friedman's, and now seems to be a wholly owned subsidiary of the Fed.
Took my brain a while to boil it down to a paragraph.
Rest assured that my opinions are neither definitive nor accurate.
Spring training game today. First Moderna shot on Monday morning.
YTD return is +0.3% while vast majority of bond funds are in red for the year.
I like the duration. The ER is too high for me to get into a B-rated bond fund. I don't think anything could get me into a B-rated fund.