Higher Yields Suggest Attractive Opportunity Set For Cash

As shown in my partner Cory Venable’s chart below since 1996, a spread widening past .80% was enough to trigger both the tech-led market bust in 2000 and the US housing and commodities-led implosion in 2007. With extreme exuberance evident in pretty much every asset class today and financial leverage that much higher, it would not be surprising if medium to long rates topped out lower than in the prior two cycles.

(Click on image to enlarge)

This all suggests another opportunity in the making to add cash to government bonds while corporate bonds and equities enter their next nervous breakdown. Everyone gets their turn in market cycles. What’s bad for speculators and price-indiscriminate buyers will be good for cash investors as usual.

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