I do not rule out a further spike in oil or any other commodities. Temporarily, Trump’s dismally poor tariff policy may also give a boost to prices.
About a year ago, Lacy Hunt at Hoisington Management stated “Secular Low in Bond Yields Remains in the Future”
Fatter Crayons Needed
In January of 2018, Hedge fund heavyweight David Tepper appeared on CNBC and, when asked whether he was short bonds, said, “You bet your heinie.” The same day, Bill Gross, citing technical analysis, proclaimed the “treasury bull market is over”.
I suggested “You Bet Your Heinie” Bill Gross Needs a Fatter Crayon“.
Long Bond Trend Still Intact
On April 12, 2018, I penned The Name is Bond, Long Bond.
Lacy Hunt at Hoisington Management offered this opinion:
“Important to the long-term investor is the pernicious impact of exploding debt levels. This condition will slow economic growth, and the resulting poor economic conditions will lead to lower inflation and thereby lower long-term interest rates. This suggests that high quality yields may be difficult to obtain within the next decade. In the shorter run, in accordance with Friedman’s established theory, the current monetary deceleration, or restrictive monetary policy, will bring about lower long-term interest rates.”
Debt and the Law Of Diminishing Returns
Please click on the above link for the rest of Hunt’s discussion regarding debt and the law of diminishing returns.
Meanwhile, ponder the strong possibility that growth is getting weaker, the Fed is nearly at the end of this rate hike cycle, and numerous firms on interest rate life support are poised to go under.
There is nothing remotely inflationary about the default setup.
This article has been republished with permission from Mish Talk.