Post by comlb on Jul 29, 2023 13:47:19 GMT
“Two years ago, to get a 5 per cent return, you literally had to look to lending to the government of Iraq. Now you get that on cash.”
A year ago, I tried to make the acronym of choice Bonds — Buying Ordinary Notes and Debt Securities. Sadly, this failed. Too boring. But step forward Kevin Gordon, an analyst at Charles Schwab in New York who emailed to suggest Barbara — Bonds Are Really Back And Really Attractive. At a slight stretch to tap in to the zeitgeist, you can even bend this to Bonds Are Really Back In Earnest, or Barbie.
This acronym has a chance of sticking. We can dream. In an ideal world, we would see Peter Oppenheimer, chief equity strategist at Goldman Sachs, opine on the matter, hitting the pop culture/markets nerd meme mother lode.
This acronym has a chance of sticking. We can dream. In an ideal world, we would see Peter Oppenheimer, chief equity strategist at Goldman Sachs, opine on the matter, hitting the pop culture/markets nerd meme mother lode.
In any case, now that Barbie has taken Tina’s crown, investors have a nice alternative to venturing out in to riskier bets: doing nothing. Professional investors have long looked down their nose at anyone who buys bonds and watches the regular interest payments roll in — “coupon clipping” in the market parlance. But as one such investor put it to me recently: “This is as God intended.”
It is not a fancy strategy, but when two-year US government bonds are yielding close to 5 per cent and 10-year Treasuries yield close to 4 per cent, who cares? “Two years ago, to get a 5 per cent return, you literally had to look to lending to the government of Iraq,” said one private wealth adviser. “Now you get that on cash. Clients are much happier that the default option of doing nothing is attractive.”
Of course, inflation erodes returns here. We can’t just have nice things. Still, the fine art of doing nothing has a number of useful applications in markets at the moment.
Of course, inflation erodes returns here. We can’t just have nice things. Still, the fine art of doing nothing has a number of useful applications in markets at the moment.
In a recent podcast(opens a new window), Jonathan Aitken, who advises large investors on strategy, spoke about exactly this. “For the first time in roughly 25 years, we’re paid not to have a view,” he said.
He continued: “If interest rates are zero, then we have to have a view all the time, because any decision to step out of risk assets is a career decision if you are not paid to wait. That has flipped on its head. If you can get the best part of 5 or 6 per cent on a US T-bill, you don’t need to have a view on these things. You are paid to wait.”
original article in FT (https://www.ft.com/content/40535316-fc22-478a-963b-7208a4e5e86c) or:
archive.ph/ndU4v