Gyroscopic Investing

His analysis as posted here is bad on many levels. I'm not going to go into a lot of detail but I will provide a couple of points folks can run with to think for themselves.

Bond liquidation vs. expiration

Current US tax law treatment of debt vs. equity

Actual US demographics vs. purported imbalances

Finally, a little nuance on public debt you never see

https://fredblog.stlouisfed.org/2017/02 ... n=fredblog

Facts are wonderful things...but the main fact is economically the US is on a very positive roll right now. That can and will change but for now the skies are quite blue.

Kbg,

Exactly as well. The stronger more ardent "we are doomed" message a blogger puts out there, the bigger grain of salt I take it with.

One of the reasons I almost never go to Zero Hedge anymore. You can get outright depressed very quickly looking at that stuff.

Cortopassi wrote:Kbg,

Exactly as well. The stronger more ardent "we are doomed" message a blogger puts out there, the bigger grain of salt I take it with.

One of the reasons I almost never go to Zero Hedge anymore. You can get outright depressed very quickly looking at that stuff.

This isn't a positive or negative comment about the media but the gloom/doom model is a proven successful business model for them. As a reader we just need to be aware of it and factor accordingly. The real challenge though is it feeds on the disproportionate way our brains weigh risk and reward that has been well documented...supposedly we weight them about 2:1.

Update: By "them" I mean media in general not just ZH.

Kbg wrote: Finally, a little nuance on public debt you never see

https://fredblog.stlouisfed.org/2017/02 ... n=fredblog

@KBG: That article was very interesting

mukramesh wrote:
@KBG: That article was very interesting

In some financial circles there is actual concern that as the great taper begins/moves along there will be a shortage of treasury debt needed by pension funds, insurance companies etc. to meet annual liabilities.

From Twitter; Kathy Jones is the fixed income strategist at Schwab. I listen to her when I need to be talked off of the ledge.

Kathy Jones‏ @KathyJones

US$ higher on talk of Taylor for #Fed Chair. Fed funds would be much higher if Taylor Rule followed.

Higher US Dollar: lower gold, lower Long Treasuries, and if the yield curve inverts and we get a recession, lower stocks. Hmmmm...

So much for the cashless quasi-pp?

Bonds are back with a vengeance this Friday. Nice.

It was amazing to watch bonds, gold, and stocks today. What fireworks!

Volatility certainly increased this past week, but interestingly my portfolio barely budged.

International FAANG stocks (BABA, etc) declined quite precipitously (40% of VP), but the PP held its own with LTT’s recovering yesterday following the Flynn debacle. I almost forgot why we hold 25% in treasuries, but now I remember :-)

...

ochotona wrote:It was amazing to watch bonds, gold, and stocks today. What fireworks!

I love when my investments go up!

OUCH

So where’s the bottom in TLT and ceiling in yields - 3.25, 3.5, 4% or more?

The technicals don't look good for TLT, but who knows? I'm definitely going to be buying some soon if this continues.

eufo wrote:The technicals don't look good for TLT, but who knows? I'm definitely going to be buying some soon if this continues.

I struggle to find a good investment thesis for bonds right now.

Wages are rising, inflation next? The economy is humming. Earnings are excellent. Tax reform done. Recession isn't on the horizon. Actually, the only thing I can see that would hamper equities short-medium term would be rising interest rates.

Tough to see a rosy scenario for bonds barring a recession. Or some unexpected geopolitical or natural disaster type of shock.

I can't find a good reason to buy anything right now, but if that allocation drops enough... I'll pick more up.

Good to see iwealth writing again! I think I last saw you write about leaving gold saying you “get stocks”, i.e. understand them and thus presumably were about to put more in them. I’m a bit envious! I’m sticking with the pp, but I would have been fine staying in nearly all stocks in 2010 instead. Where “fine” = glorious.

More on topic: I know the 30-year bonds are held for their volatile price movements, but if the ten-year note yield keeps rising, it’s yield I’ll be thinking about. Tempted to, anyway.

I think if you backtest the PP using 10-year Treasuries instead of 30-year Treasuries, there is not a whole lot of difference in the results.

dualstow wrote:Good to see iwealth writing again! I think I last saw you write about leaving gold saying you “get stocks”, i.e. understand them and thus presumably were about to put more in them. I’m a bit envious! I’m sticking with the pp, but I would have been fine staying in nearly all stocks in 2010 instead. Where “fine” = glorious.

More on topic: I know the 30-year bonds are held for their volatile price movements, but if the ten-year note yield keeps rising, it’s yield I’ll be thinking about. Tempted to, anyway.

Oh I did put more into stocks, but I tried to bottom pick the energy sector and got torched - luckily rode it out and recovered but whoooosh what a ride. On the bright side, it's made me entirely immune to drawdowns.

stuper1 wrote:I think if you backtest the PP using 10-year Treasuries instead of 30-year Treasuries, there is not a whole lot of difference in the results.

They would only go in the vp. I don't mess with the core.

The MIDDLE part of the yield curve is taking it in the shorts based on 1-year momentum.

MangoMan wrote:What is the conclusion of those 2 charts? That although the yield is about to break out to the upside, relative to stocks they are still a good buy?

I'm wondering the same thing.

I feel a great temptation to tweak my holdings, which almost always means... I shouldn't. Lol.

MangoMan wrote:What is the conclusion of those 2 charts? That although the yield is about to break out to the upside, relative to stocks they are still a good buy?

The author just wanted to tweak people who were going to ditch bonds, I think. The point is that you may be relatively safer in bonds than stocks. So stocks down 80%, bonds down 40%. Win?

These ratio charts are interesting, but they are ratios - they don't say anything about absolute levels. Like the gold-silver ratio. About 80 now. Well, it could revert to 50 if gold went to 850 and silver 17, but I doubt anyone would be celebrating.