Why is everyone so convinced the low bond yields will push investors into stocks? Earlier today, I read about an interview with Mobius, the famous emerging markets portfolio manager at Templeton, where he highlighted:
“People are now beginning to realize that they cannot be sitting on bonds that are paying one, two or even three percent, when inflation is running higher than that,” Mobius said, adding that investors would look increasingly at equities as an alternative.
“If you look at equities of course, the yields are much, much greater than the bonds.”
The sentiment has lately been a favorite of pundits on CNBC and everywhere else.
Viewing the remainder of this article requires a Subscription
Here's one that we haven't talked about in a while. About a year ago, Meredith Whitney was positing the death of municipal governments across the country; I was just predicting a difficult issuing environment. We were early. Today, though, MUB is down 2.5%.
Viewing the remainder of this article requires a Subscription
Long term trends are very difficult to time, but cannot be ignored as a backdrop for cyclical and secular moves.
Viewing the remainder of this article requires a Subscription
Portugal, and yields, and Iran - oh my! None of these are new stories.
Portugal is bigger than Greece - but we knew that. Moreover, we knew Portugal was in dire straits. We knew Germany was already hesitant to provide more assistance and would demand higher guarantees.
Viewing the remainder of this article requires a Subscription
In a nutshell, this article summarizes the problems we are facing.
Viewing the remainder of this article requires a Subscription
I am bearish on treasuries long term, but in the short to medium term, I'm not sure investors will have many alternatives, especially as the euro denominated debt continues to pose currency, liquidity, and solvency risks. Then there is the issue of implementation.
Viewing the remainder of this article requires a Subscription
I assume Berlusconi is having some sleeping problems this week as his government falls; his only consolation is that prognosticators who predicted Italian bond yields would fall when he's gone have turned out to be completely mistaken. The problem with Italy isn't Berlusconi . . . it's Italy.
Viewing the remainder of this article requires a Subscription
Here in the US and internationally, spreads are telling a story that's worth listening to.
That's 30/10, meaning 30 year yields are rising faster (bond prices falling) than the 10 year yields.
Viewing the remainder of this article requires a Subscription
From
Wikipedia:
A Minsky moment is when over-indebted investors are forced to sell good assets to pay back their loans, causing sharp declines in financial markets and jumps in demand for cash.[1][2] In any credit cycle or business cycle it is the point investors begin having cash flow problems due to the spiraling debt incurred in financing speculative investments.
Viewing the remainder of this article requires a Subscription
There is a flood of data and headlines that seems almost spiteful to anyone trying to enjoy their usually-slow August. For me, it gives a good excuse to turn away and read even slower as most of the flood is meaningless for my portfolio. That being said, some of it is not.
Viewing the remainder of this article requires a Subscription
The US was downgraded and bonds went up...relative risk. In a world where equity markets are swinging 2-3% even before the open, bonds, even of a lower rated sovereign start to look mighty interesting - until they don't. For now, there's an economic name for it: deflation.
Viewing the remainder of this article requires a Subscription
S&P downgrade US treasuries, as expected...actually, I thought Moody's would downgrade as well, if only to make a statement about their power and impartiality and regain some lost trust.
Viewing the remainder of this article requires a Subscription
On Friday, into the close of the market, with no debt deal in site, treasury yields fell as prices rose with seemingly superhuman strength.
You might be wondering, "Why on earth would prices rise as default risk increases and the US's credit rating is threatened?" Good question - I'm sure a lot of people who were shorting the 10 year into the weekend were thinking the same thing.
Here's the analysis from
Brad DeLong:
Yes, it is insane.
Viewing the remainder of this article requires a Subscription
One might think that a looming debt downgrade would cause a sell-off in treasuries...One would be wrong. the 10 year is not at the highest level ever, but let's put rates in perspective.
Viewing the remainder of this article requires a Subscription
Three words: money market funds. Euro breaking apart. Banks at risk. Liquidity at a premium. Downgrades of global sovereigns. Equity pullback. Sure, all of these are important and I don’t want to discount them. In the end, though, they will all “speak” through the money market funds.
Viewing the remainder of this article requires a Subscription
Fixed Income/Bonds, Strategy/Allocation | | 
March 22, 2012 4:36 pm | 
Comments Off 
