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Bonds, buy Bonds

February 18, 2020 / / No Comments

Earlier this month I wrote a post Bumpy road ahead. Short term traders probably think what a foolish call that was, because the stock market went nowhere but up since then. While the intention of the post was not to call the top, it was to warn you that volatility could pick up. Riding up trends in low volatility environment is nice, and while calling tops is not sensible, we must ensure we not become complacent. Easy times can last longer than most anticipate, but they can be escorted by volatile moments too.

You might want to try to play heightened volatility by buying puts or by executing some other options strategy, shorting stocks, or by doing something else. However, I think the best risk reward opportunity right now is to be long bonds.

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Bumpy road ahead

February 2, 2020 / / No Comments

Markets fluctuate, they go up and they go down too. Our job is to make the most out of these fluctuations by going with, and not fighting, the tape.

Even though you could have pointed out many reasons why one should have been expecting a correction, or even a crash, we’ve been bullish for the most part of last year up until now. Looking back, that was the only right decision to be made.

However, we think now could be the time for becoming cautious going forward. We’re not becoming ‘the end of the world’ bearish yet, but the ride could become bumpier.

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From yield curve inversion to bond squeeze?

December 4, 2018 / / No Comments

Yesterday we got the first US yield curve (3 and 5 year) inversion since 2007. Usually a recession follows within two years but I don’t want to scare you with that. Firstly, it doesn’t have to happen immediately and secondly, if you read any of my posts lately you know that getting defensive is not something we should fight against and in that case you’re well prepared for a case of a downturn.

The point of this post is to point out that we could see a flight to safety, that is into treasury bonds. A lot of people are expecting inflation and interest rates to rise over time, meaning bond prices to fall, including me (see Bond breakdown?). But it looks too many got ahead of themselves so it would be irresponsible to ignore the intermediate term risks in the market. Let me present what I think could happen.

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Bond breakdown?

September 19, 2018 / / 1 Comment

… and inflation is coming.

I could end the post with this. For some this could be the news, for others maybe not so much. I wrote a post last year But aren’t bonds supposed to only go up? Like then also now I was chatting to a friend recently and he was very surprised when I said I’m expecting inflation to pick up.

Most people think we’ll stay in this disinflationary and low rates environment forever. But we’re getting inflation signs everywhere. For example, the housing market is strong in most cities (in Europe) and it seems it could stay that way for a while. There are some other big infrastructure projects under way. Food prices are slowly but steadily rising. Huge pressures on salaries starting to emerge. And I believe oil prices could rise to $100 in the near future too (see here)!

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Sell bonds and buy micro-caps

July 2, 2017 / / No Comments

I would like to start with my tweet I posted 10 days ago.

So far this has been a great call. Before continuing, please read my past post about gold here, where I discuss that gold price is likely to trade lower.

Now, back to bonds. Read More

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