This morning’s post highlighting Jim Grant’s bond market/interest rate views (by way of Heisenberg) prompts me to reproduce publicly NFTRH 490‘s short bond segment. I may be known as the guy calling yields to decline but in context I am the guy calling for caution at a potential limit area who has appropriately called for yields to rise and decline all through the bond market’s recent history. It is important not to get lost in bias or dogma.
Bonds and Related Indicators
Long-term yields lurk just below our targets of 3.3% (30yr) and 2.9% (10yr). The yields on the short end remain relatively strong as evidenced by the flattening yield curve. This remains a positive macro picture (whether manipulated or not, my job is to play it straight and convey the message of the bond market, not to wear my tin foil hat).
Remember American International Group? They’re the good people that got massively rich, blew up, demanded almost $200 million in retention bonuses from taxpayers (and got them) and went on their merry way. They’ve been chugging along ever since the long-forgotten financial crisis, but it seems to me the ol’ chart is starting to break down.
Do you think we will ever see a week of market moves associated with news events for which you will not shake your head?
Week after week I think analysts say something so stupid that I just want to scream. As I have pointed out so many times over the years, I keep hoping that some form of sanity will grip pundits one day. I keep hoping that they may wake up and recognize the error of their ways. But, alas, I continue to long for that day.
So, whenever the market moves, everyone goes through the exact same thinking process: “Hey, look. The market just saw a big move. Let’s go see what news caused this move.”
Is this not the structure of almost all the analysis you see presented? Let’s look at this past week, for example. During the week, the futures took a strong downturn. And within hours, every analyst was certain that it was “caused” by Gary Cohn’s resignation.
So, let’s think about this. For how long has this resignation been telegraphed? I think we all knew it was coming. So, are you going to tell me that the market did not already have this “priced in?” You see, this is where this type of analysis gets really fuzzy.
Remember that ridiculous story about the publicly-traded Long Island Iced Tea company that decided to “pivot” and focus on blockchain technology? Well, the pivot worked amazingly well – – for a little while. Let’s just say the stock has just about come full circle at this point.
There is freedom within, there is freedom without
Try to catch the deluge in a paper cup
There’s a battle ahead, many battles are lost
But you’ll never see the end of the road
While you’re traveling with me……….
Welcome to a new week, everyone. First off, unrelated to anything, I’ve just got to see that this story about how California’s high-speed rail is going way over budget (tens of billions) and is going to be many years late is the least-surprising thing I’ve ever witnessed. California came up with this thing in the throes of the financial crisis, I guess as a changey-hopey way to convince citizens they were forward-thinking, but I immediately concluded it would be an utter debacle.
For those unfamiliar with it, the idea is basically to retrofit existing tracks, as well as build new ones, to create a sorta-kinda “high” speed train between San Francisco and, frankly, Disneyland (portrayed as “Anaheim”). This is not going to be anything like those amazing multi-hundred MPH beauties from Japan or China. No, in the end, it’s going to be an incredibly expensive, incredibly late, slightly-modernized train which they’ll probably wind up driving at 80 mph or so. My dire prediction seems to be right on target so far.