Raoul Pal @RaoulGMI Founder/CEO - Global Macro Investor and Real Vision Group, Business Cycle Economist, Investment Strategist, Economic Historian, Traveller and Rum Drinker.. Mar. 14, 2020 1 min read

The Greatest Macro Risk Reward Trade of Lifetimes - being long bonds our entire career will one day end, not with a bang but with a whimper as the central bank ends up buying them all. But that is the story for another day, long into the future.

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Meanwhile, the Chart of Truth (10 yr yield regression channel) suggests there is plenty more to go, even after recent volatility (probably brought on by some big liquidations in hedge fund land (another story that will no doubt break soon).

Rates will hit zero... possibly very soon indeed.

But one thing I do know, is that Risk Parity strategies are going to go out with a bang if the stock market falls any further and an era of 60/40 or 70/30 portfolio allocations will die too.

As rates get to zero, our investment world will change and how we invest will have to change too. With rates at zero, bonds act as cash (less cap gains) and that leaves most portfolios dramatically overweight equities with no cushion.

Again, a post card from the future...

Meanwhile buy bonds, wear diamonds.

Its Fed week next week and I don't see how they can disappoint the market.

They need to go big - maybe straight to zero.


You can follow @RaoulGMI.



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