The sort of flight to safety and risk-aversion and a willingness to accept near negative real rates of return on bonds is eerily reminiscent of the sort of attitude toward equities at the generational market bottom in March 2009.
Stanley Druckenmiller exit is reminiscent of when value was out of favor and Julian Robertson quit in the early 2000s.
From my perch, the decision by Stanley Druckenmiller (who is one of the smartest and most philanthropic hedge-hoggers extant) reflects how difficult it is to deliver superior investment returns in an algorithm-driven world of short-term momentum investors.
Stanley's exit is reminiscent of when value was out of favor and Julian Robertson quit in the early 2000s.
I suppose you can say history rhymes!
We had a big turnaround in the RTH after TGT's upbeat comments.
Stanley Druckenmiller is shutting down his hedge fund. This is a huge surprise to the investment community.
Dr. Jeremy Siegel compares the bubble in the bond market to the Internet and technology mania a decade ago. Unlike tech stocks, however, bonds eventually get paid off at par!
In the piece, he compares the bubble in the bond market to the Internet and technology mania a decade ago that "saw high-flying tech stocks selling at an excess of 100 times earnings. The aftermath was predictable: Most of these highfliers declined 80% or more, and the Nasdaq today sells at less than half the peak it reached a decade ago."
Dr. Siegel goes on to state, "A similar bubble is expanding today that may have far more serious consequences for investors. It is in bonds."
I have disagreed with Wharton's Dr Siegel on numerous occasions, and I will, once again.
I agree with the kind Professor's conclusion that bonds are in a speculative blow-off.
The difference I have with his parallel between tech stocks and bonds is that, unlike tech stocks, bonds eventually get paid off at par!
Shorting the U.S. bond market will be the trade of the decade.
For the first time since 1962, the dividend yield on the DJIA has eclipsed the yield on the U.S. 10-year note.
A flight to safety, the ramifications of the administration's stupid populist policy, the growing perception of a structural rise in U.S. unemployment, fears of a double-dip, concerns of deflation, the emergence of nontraditional (and intermediate-term) headwinds (e.g., fiscal imbalances, higher marginal tax rates, costly regulation, etc.) that will serve as a brake to domestic growth, an extension of zero-interest-rate monetary policy with more quantitative easing and the long tail of deleveraging (and reduced availability of credit) all help to explain the strength in the bond market and the precipitous drop in yields.
Nevertheless, I view the great bull market in bonds to be approaching a speculative blow-off, and I am increasingly of the view that shorting the U.S. bond market will be the trade of the decade.......