- The Bad (Bond) News Bear...
- The Saudis Brought a Knife to a Bond Party
- The Big Hedge
- It’s Time to Short the Bond Market
- A High-Tech Way to Cash In on Investors' Endless Search for Yield
- The Shocking Reason Governments and Corporations Are Begging People to Destroy Their Own Money
- Grab the 1,000% Profit Potential in "Black Swans"
- Here's a 9.1% Yield Plus Double-Digit Gains, Courtesy of the "Bond King"
- Last Time Bonds Did This... These Stocks Surged
- Here's What's Triggering These Massive Bond and Stock Rallies
- The Yield Curve Inversion Just Created a Huge Opportunity for These 3 Stocks
- Own This Before the Global Debt Bomb Explodes
- Here's What March Told Us About the Coming Bear Market
- When This Line Crosses 3%, Run for Cover and Get Short
- This “Bond Buying” Company Could Climb 100%
- I'm Calling It - The Bond Market Bull Is Over
The Fed’s backstopping of the bond market was an effort to save the U.S.
stock market, but it’s clear now that saying it and actually doing it are two very different things.
Our Shah Gilani’s takeaway from it is that it’s time to short the bond market.
And today he’ll show you exactly how to do that to ensure you’ll walk away with the most profits….
If you're of a certain age, you've probably heard a financial planner say that you should have some money in fixed income - and the closer to retirement you get, the more you're supposed to own.
Now, I'm not going to wade into the lively debate about investing in bonds. Tens of millions of investors hold them, and there are probably just as many opinions.
But it does bring us back around to the existential question of 21st century investing: How do you collect any meaningful bond yields in a zero-interest rate market?
That's particularly pressing for investors over age 50 - or, really, anyone building a retirement fund for themselves.
Now, I've always believed that the road to a happy, prosperous retirement is paved with tech - even more so in an era of low to no interest rates.
And there's an entire bond market I know whose management's taken that very idea to heart. The leadership team is bringing that notoriously low-tech investment into the 21st century, and, even now, reaping remarkable gains for their efforts.
"There is nothing new under the sun," Ecclesiastes wrote. For the most part, the pseudonymous biblical poet was right on the money.
The credit market, for instance, has existed in one form or another since 3,000 BCE or thereabouts - around 5,000 years.
At the dawn of human civilization, the Mesopotamian economy featured interest rates as high as 20%. And by the time Cyrus II of Persia ("Cyrus the Great" to his friends) conquered Babylon in the sixth century BCE, creditors could often reap a positively mouthwatering 40%.
Ah, the good old days...
Unfortunately (and with apologies to Ecclesiastes), there is something very new and very dangerous under the sun these days.
A frenzy of capital destruction - the end result is functionally no different than gathering up all your money, dousing it with gasoline, and setting it alight.
It's unprecedented; it has never happened before, in all of the five millennia that tribal chieftains, warlords, monarchies, principalities, Westphalian nation-states, and multinational corporations have been buying and selling debt.
I'm talking about negative yield.
If that sounds unnatural... perverse.... even insane... well, that's because it is. And not much good can come out of it.
We might as well get used to it; rates are likely to stay lower for longer.
All around the world, there are around $17 trillion in assets "offering" negative yield, which is to say whatever government you're financing promises to give most of your money back at maturity.
Investors are seeking the return of their money rather than return on their money.
Here in the United States, the president is pounding the table for lower interest rates to boost the economy; the Fed is speculating openly about a global slowdown and a protracted trade war.
Same old, same old.
The only ones that even hint of something different are the "permabears" - you know, the folks who always talk about doom, gloom, and the end of the world.
Even casual investors have heard the name Jeffrey Gundlach; he's quoted nearly every week in financial publications.
Gundlach had dazzling success in the rough-and-tumble mortgage-backed securities and credit markets during a market that bankrupted his less savvy rivals. It was this success that led Barron's to acclaim him "King of Bonds" in a February 2011 cover story.
After just six months in the banking business, the ex-musician and summa cum laude Dartmouth philosophy and mathematics grad was managing several hundred million dollars - doing more than his bit to ensure Trust Company of the West Group spent the entire decade from 1999 to 2009 in the top 2% of intermediate-term bond funds.
When he left TCW in 2009, he founded his own firm, DoubleLine Capital. After barely eight months in business, DoubleLine outperformed every single one of the 91 other bond funds in the Morningstar intermediate-term bond category.
In other words, Gundlach has a legendary reputation - and a performance track record that more than backs it up.
Now that the yield curve has inverted, investors are widely panicking.
Yes, short-term rates are currently higher than long-term rates, but that’s not the worry.
The big problem is much of what the talking heads on TV are saying about it is flat-out wrong. And that is potentially dangerous for your money.
Here’s the thing: Investors who don’t adapt to these changes risk losing out on the superior returns these conditions make possible.
As waves of capital poured into U.S. Treasuries this year, causing bond yields to fall precipitously, the flight-to-quality trade sparked fears of recession and worse.
Federal Reserve officials registering inflows into Treasuries as a sign of investor fear had to soothe markets with talk of interest rate cuts.
Bond markets, anticipating future rate cuts, saw more capital inflows.
Treasury prices rose further with the bond rally, lifting stocks back up toward record territory.
That's what everyone sees on the surface, but there's a lot more to the story, and it's not all good.
On Friday, the yield curve inverted.
For many experts on Wall Street, a yield curve inversion is one of the strongest warning signs of a coming recession.
Debt is a four-letter word. It's that simple.
Yes, it's a useful tool when used properly and in the right amounts.
But governments, especially, know no bounds. Global public debts have reached insane, and ultimately hazardous, levels.
In the last 15 years, worldwide debt has more than doubled, up by nearly $150 trillion.
In July, the Institute of International Finance warned that global debt rose the most in two years, by $8 trillion in the first quarter of this year, reaching an astounding $247 trillion.
That number represents a staggering 318% of global GDP.
Much of it will never, ever get repaid.
As a result, the bond market, where the bull died in 2016, will become a bloodbath. Being long there will be outright dangerous to your financial health.
You've seen this in cheesy Western movies: an armed standoff that often begins with some variation of "This town ain't big enough for the both of us."
That's where we are now with stocks and bonds. And we're rapidly approaching the point where the town ain't big enough for either of them.
The U.S. Treasury continues to pound the market with massive amounts of new supply, but Treasuries held their own this month and even rallied a bit.
Instead, stocks caught it in the neck.
So what's happening? Nothing good...
It's a simple question of liquidity, or, more specifically, the lack of it.
As I've been telling my Sure Money readers, there's no longer enough liquidity in the system to support bullish moves in both stocks and bonds.
If one rallies, the other must be the source of funds for that rally. So in March, stocks were the liquidity sink that supported the rally in bonds.
And don't be fooled by events like we saw this past Thursday, when there were rallies in both stocks and bonds: Neither baseball, nor life, nor markets move in a straight line. They are full of surprises.
But those surprises happen in the context of a broad arc. And right now, that arc is pointing down.
The geopolitical and market bogeymen of the moment - Kim Jong Un, Vladimir Putin, tariffs, cyber warfare - are riding tall in the saddle.
That's sparked something of a "flight to safety," which ignited a bit of an uptick in demand for Treasuries this month. But that wasn't enough to send yields lower.
I'll tell you why - it's the same thing I told my Sure Money readers back on March 3, and nothing has really changed, at least, not for the better.
In fact, things have gotten somewhat worse.
Investors are pouring money into stocks, buy this bond-buying company could skyrocket by 100% in roughly three years.
This company makes money from bonds, no matter whether investors are buying or selling.