One of the more striking headlines yesterday was that Swiss government bonds now have negative yields out 50 years – that’s right, 50 years! That’s a little hard to fathom, partly because we don’t have bonds that extend that far, but also because 50 years is such a long time. I mean, if I bought a 50 year bond, I’d be in my 90s before I got my money back. Forget inflation, I’m just talking… Read More
One of the interesting things about the stock rally last week is that bonds also rallied. Over longer periods, stocks and bonds are lowly correlated, which means that they are generally independent from each other. Over very short periods, especially when there is a lot of activity, stocks and bonds are usually negatively correlated. If you had told me that stocks would rebound sharply last week and gain 3.27 percent, which reversed most… Read More
One of the phrases that I hear over and over, but simply don’t like, is that ‘markets hate uncertainty.’ Forget the fact that markets are just made up of people and don’t have independent emotions, I’m talking about hating uncertainty. From a theoretical standpoint, let’s think about how uncertainty affects markets. Let’s start with the idea that the value of an investment is the present value of its future cash… Read More
