Exit Stage Left, Thank You Very Much
OK, I’ll shut up now. I’m taking my ball and going home.
If you’ve been reading my comments for any more than a month, you’ll see that I can’t shut up about Treasuries… “They’re a good investment, that you need to own them, that they look like a good trade, that the biggest bond buyer in the world hates them… and then he was wrong.“ Starting with this post in February of this year (2011) where I laid out my original rationale for owning longer treasuries through the exchange traded fund, the TLT.
…and now I’m gone. Done. Sold them all. Why? Because everyone wants to own them now. There’s a bit of stock market panic in the street and everyone’s rushing toward treasury bonds.
Here’s a chart along with my narrative. You can plainly see that something is “out of whack” on the right hand side of the chart:
The last time I personally observed panic demand for these bonds was during December of 2008 and we happened to own a bunch of them back then too…. and I was more than happy to sell them out of client accounts back then too.
A couple of days ago I wrote an article about how we reserve part of a portfolio for bonds and a part for stocks, and we move in and out of the asset classes as appropriate. You can probably guess that most (if not all) of the bond portion of our accounts have been filled out with TLT since February.
Now, the tactical bond portion is empty again… as you probably figured out.
Here’s where it gets interesting… We’ve been unloading stocks out of client accounts since my May 2011 post called, “Time to Start Digging?”. As I write this post, we’re left with only about 6% to 8% of our capital in stocks because of it.
For clients, this means that for the last couple of months and doubly the last week or so, we’ve made more on the bond side than we gave up on the stock side… which is exactly what I tried to explain what I was shooting for a couple of days ago.
Of course, the tactical cupboard is bare. We’re out of stocks and out of bonds. And you know what? Given all the goofiness in the world at the moment, I can’t imagine a better place to be right now. Not to mention I’ll finally shut up about those damn bonds!
