Has the Bear Market in Bonds Run Its Course?
There’s nothing like a potential act of war to press the ‘pause’ button on a bear market in bonds. The sinking of a South Korean warship in disputed waters (well, disputed by North Korea) initially raised concerns that the sinking was at the hands of Kim Jong-Il’s minions; while no one is really sure yet if that is true, or whether such an action would be part of an intentional provocation or a spastic exercise of diplomacy by other means (my bet is on spastic), the point is – as it always is when the Supreme Leader is concerned – that no one is really sure of what’s likely to happen next. It seemed prudent to cover short positions in bonds in such a context, but as the weekend has passed without further incident this has probably faded as a bullish influence.
Some bond bears were probably also scared by the fact that CNBC asked the question on Friday, “Time To Sell Bonds To Buy Stocks?” (Remind me when they last asked whether it was time to sell stocks to buy…anything?) They’re half right this time, I think, but I don’t like having them as company either. Balancing the Groucho effect (“I don’t want to belong to any club that would accept people like me as a member”) is the Holiday Inn Express effect (in which people develop amazing abilities unrelated to their backgrounds: “Are you a doctor?” “No, but I stayed at a Holiday Inn Express last night”). Barron’s, specifically Michael Santoli, who writes the “Streetwise” column, sought to explain why rising yields are good for stocks. When equity guys are busy telling the bond vigilantes why they’re not scared of them…they’re scared of them.
Investing, Long Term Investment, stock market | admin March 28, 2010
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