Bonds Are Getting Spanked
Ouch! Bonds are getting publicly spanked.
As Holger Zschaepitz (@Schuldensuehner) points out, the most popular treasury bond ETFs, TLT (the iShares 20+ Year Treasury Bond ETF) lost a whopping 51% since peaking in 2020. It’s now at the lowest point in 16 years. Oy vey!
Of course, if you’re a long-time reader this comes as no surprise. We’ve been bearish bonds for some time. Now, the mainstream press is telling folks to hold their noses and buy bonds...
But we disagree. As Chris pointed out a few months ago in the Insider Newsletter:
Investing in fixed income (aka bonds) at the end of a debt supercycle is like eating vindaloo that has been left out on the bench for a week and has gone furry.
We believe bonds are due for a multi-year bear market with the duration and magnitude of this bull market likely to surprise everyone (including ourselves). Could we see a repeat of 1960-1980 where bond yields rocketed from 4% to almost 16%? Possibly...
Which brings us to...
NEW KRUGMANISM
If you listen to “luminaries” like Paul Krugman, inflation is a thing of the past. That is, if you don’t account for food, energy, shelter, used cars,... you know, everything that us bipeds spend most of our money on.
In fact, as one commenter points out, the true inflation rate might very well be 0%.
On a serious note and going back to our earlier point about bonds and rising bond yields...
Bond yields are essentially a function of inflation expectations. If — like us— you think oil prices are going above $100, then inflation is far from being “transitory.”
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Disclaimer: This is not intended to render investment advice. None of the principles of Capex Administrative Ltd or Chris MacIntosh are licensed as financial professionals, brokers, bankers or even ...
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