Yesterday, we noted that big money is still moving into the dominant large-cap U.S. tech names, especially exchange-traded funds (ETFs) tied to the “Magnificent Seven” stocks.
But that’s not the only place where capital is flowing in.
With both the 10- and 30-year Treasury bond yielding over 5%, it’s clear that bonds are a hated trade.
At least, on the price side.
Yields, on the other hand, are beginning to attract a bundle of cash.
A saver begins to think “when I can get 5.7% returns with zero market risk, why take the risk at all?”
It should be no surprise that last week saw a surge of buying in the long-dated Treasury bond ETF, iShares 20+ Year Treasury Bond ETF (TLT):
The ETF isn’t just at a 52-week low. It’s at a multiyear low. And bonds are now coming into a period of their worst 10-year performance in American history. Again, on the price side.
The yields make this contrarian trade worth a look.
At some point, AI financing will hit a snag. The “ballast” of bonds will be helpful for a portfolio, particularly at today’s prices and yields.
And at some point, too, the real economy will assert itself in portfolios as much as affordability is setting itself politically in the ballot box.
Violent enough, interest rates will snap lower. And today’s bond holders will get price appreciation on their bonds on top of today’s histrionic yields.
There may be some more hand-wringing ahead. The 30-year may even hit 6% first.
But we’re closing in on the end game, and the massive inflows into TLT suggest that investors are already seeking the high yields in boring old bonds.
Today, Andrew’s doubling down on our contrarian bet on Bessent’s “Treasury squeeze” first described on August 26. This trade is entirely in preparation for a contrarian twist.
~ Addison
P.S. Last week’s Grey Swan Live! with Shad Marquitz was a masterclass in what to look for in resource investing.
We shared our insights from last week’s trip to Colorado to interview mining executives, as well as what we’re seeing in the resource space now. The replay is up on the site here. Whether you’re a seasoned resource investor or not, you’ll get some valuable information out of this week’s livestream.
Details to come on this week’s Grey Swan Live!
