Several weeks ago I suggested investors consider reducing their exposure to 10-year treasuries. At the time, the world’s most important debt security was yielding around 3.80%. They would continue to fall to a near-term low of 3.60%. In this case, the timing was good as these yields have rallied some 60 bps in turn crushing bond prices. For example, EDV and TLT have dropped more than 10%. So why are 10-year yields rising in the face of Fed cuts? There’s a good reason: term premium. Bond owners demand a premium if owning the debt of a fiscally irresponsible government. And this has major implications for investors…
Debt
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Howard Marks on Asset Allocation
Sometimes I wonder if the ‘cyber ears’ are listening? One day after I shared my thoughts on how investors should prepare their defense – Howard Marks – shared his latest thoughts on asset allocation. His post was the ideal follow-up to my recent post… where I talked about finding the right balance between risk and reward. Marks’ latest missive reminds us that the investment landscape has undergone a dramatic transformation in recent decades – where the popular “60/40” portfolio may not work in the years ahead… and now is the time to think more about defense (vs offense)
Are Chinese Stocks ‘Investable’?
The recent rally of over 25% in Chinese was something we’ve not seen in over a decade. Beijing’s ‘stimulus blitz’ excited both institutional and retail investors alike. As context, China has struggled with deflationary pressures due to a prolonged real estate downturn and weakening domestic consumer confidence. In addition, a slew of economic data in recent months has missed expectations, raising worries the world’s second largest economy may not achieve its 5% full year growth target. The question is can the central government turn things around with more stimulus? I doubt it….