The treasury short idea is compelling, but I can't shake out the fact that there will be a significant amount of flow coming from the equity funds to the bond funds - when people get their statements, they'll switch their money to the best performing assets over 2002, which was of course bonds and REIT/housing equities. It'll be a beautifully wrong time to switch to this sector, but of course it'll be delightful to take advantage of it.
I suspect that 2003 will see the peak of both those markets (although I don't know whether the dog wags the tail, or the tail wags the dog).. The problem is that I could easily envision a 4.25% yield before the bond bubble collapses.. the last time that crude was at 30 bucks was early October, and bonds were 4.7% then. I like your call, but the timing of it needs more rationalization.
Personally, the signal that I'm looking for to go short bonds is when I read massive headlines in newspapers consistently talking about "the threat of deflation"... that's when I'll go for a longer term short (more than a week-trade). Other signals include the relative strength of the USD vs. Euro/Yen, relative economic strengths of those regions, and geopolitical concerns.. the best case scenario for a short bond position would of course be a dropping US currency, coupled with absurdly high GDP growth, oil at 50 bucks a barrel, and newspapers screaming about deflation and listing quotations for income trusts and bonds before equities, with record inflows into those types of funds!
OK, I'll get off the narcotics now. |
