Oh, don't be silly... "This sort of stuff" is how bond mkts work and it determines how much you under- or outperform the index. So of course clients would care.
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Global Macro Trading Journal
- Thread starter Daal
- Start date
Well I'm very new to this, encouraged by Mav to dip my toes in the water. Managed to construct a crude chart on Sierra Charts to track the NOB, and I see it has been declining the last couple of days, for whatever reason.The curve has been upward sloping, but relatively flat, by historical standards. Falttening in yield terms, in this case of a selloff, meant that the back end yields went up by less than the short end yields. To be fair, not by a lot, but the fact that this has happened after what we have learned is rather amazing.
Meanwhile, my STPP ETF (2y/10y) has been doing OK.
It's all a bit esoteric at this stage, though I'm sure if I apply myself it'll all become clearer.
Need to thank JJ90 here, your input plus some margin considerations and them not looking good recently had me close all US bond positions before the elections, saved me a bunch so far. Still considering adding new bond positions in the next couple of weeks, but not decided yet.
Hah, next time I'm in HK you can buy me a drink!
My pleasure, sure let me know if you are in the area (HK Shenzhen Macau )
Now holding more cash than I wished but with US and international bonds, gold and non USD pegged currencies still going down hard, USD cash is looking pretty good at the moment next to an equity portfolio.
Now holding more cash than I wished but with US and international bonds, gold and non USD pegged currencies still going down hard, USD cash is looking pretty good at the moment next to an equity portfolio.
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No its irrelevant nitpicking nonsense. Gundlach was right about keeping his duration low, it enabled him to avoid losses and withdraws. Trying to argue that it wasnt is just nonsenseOh, don't be silly... "This sort of stuff" is how bond mkts work and it determines how much you under- or outperform the index. So of course clients would care.
Whatever you say...No its irrelevant nitpicking nonsense. Gundlach was right about keeping his duration low, it enabled him to avoid losses and withdraws. Trying to argue that it wasnt is just nonsense
Whether the investor/bond manager decreased duration by selling long-term bonds or by selling even more intermediate-term bonds is of so little relevance compared to the DECISION of cutting back duration. By a factor a many times, especially in times like now. Its just nitpicking to raise that technical pointWhatever you say...
Like I said, you're certainly entitled to your opinion...Whether the investor/bond manager decreased duration by selling long-term bonds or by selling even more intermediate-term bonds is of so little relevance compared to the DECISION of cutting back duration. By a factor a many times, especially in times like now. Its just nitpicking to raise that technical point
Will a further rise in risk free interest rates break the US stock market?
It all comes down to why rates are up, to me the most important question right now for US assets is how much will the Trump policies generate in terms of the inflation/growth mix.
Truth is, no one knows the answer. At the end of the day you got to make a 'read' on the people involved and go with it.
My read is that the Trump administration will be light on the negative growth policies (like Trade and constraints to the flow of people, partially because of the "TARP effect" I mentioned before, partially because they are not economically stupid) and they will be more present in the pro-growth policies like deregulation, tax reform, and infrastructure spending.
Different assumptions will yield a different outcome. But with my assumptions, looking at the CAPE ratio makes less sense than looking at the forward PE. That is because profit margins will be protected and could even expand with that policy mix. So there is no reason to expect mean reversion on profits (except if there is a recession). The forward PE is around 18, a 5.5% earnings yield. Plus you get growth (nominal growth). A 5.5% earnings yield (a real return metric) compares well to the 30y TIPS spread of 1.8%, which yields a ~1.1% real return to the investor.
So if the assumptions about growth holds, equities are quite cheap relative to bonds. And if bonds continue to sell-off, it still ok, as a long as the assumptions about growth and profits hold
A potential wild card is how much a large and growing budget deficit could affect real rates. Perhaps there will be higher growth but with a large and growing deficit to finance all of this, bond investors could get spooked and there would be higher expected inflation as well. Even though the policies are benign on the surface. But the excess returns one can earn on equities appear to be so large relative to bonds, that I dont think its such a big deal
It all comes down to why rates are up, to me the most important question right now for US assets is how much will the Trump policies generate in terms of the inflation/growth mix.
Truth is, no one knows the answer. At the end of the day you got to make a 'read' on the people involved and go with it.
My read is that the Trump administration will be light on the negative growth policies (like Trade and constraints to the flow of people, partially because of the "TARP effect" I mentioned before, partially because they are not economically stupid) and they will be more present in the pro-growth policies like deregulation, tax reform, and infrastructure spending.
Different assumptions will yield a different outcome. But with my assumptions, looking at the CAPE ratio makes less sense than looking at the forward PE. That is because profit margins will be protected and could even expand with that policy mix. So there is no reason to expect mean reversion on profits (except if there is a recession). The forward PE is around 18, a 5.5% earnings yield. Plus you get growth (nominal growth). A 5.5% earnings yield (a real return metric) compares well to the 30y TIPS spread of 1.8%, which yields a ~1.1% real return to the investor.
So if the assumptions about growth holds, equities are quite cheap relative to bonds. And if bonds continue to sell-off, it still ok, as a long as the assumptions about growth and profits hold
A potential wild card is how much a large and growing budget deficit could affect real rates. Perhaps there will be higher growth but with a large and growing deficit to finance all of this, bond investors could get spooked and there would be higher expected inflation as well. Even though the policies are benign on the surface. But the excess returns one can earn on equities appear to be so large relative to bonds, that I dont think its such a big deal
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