Tuesday, June 01, 2010


Not to pick on the author of the below statements, merely illustrating the prevailing wisdom espoused by most experts earlier this year, which I vehemently disagreed with.


Feb. 4 (Bloomberg) -- Nassim Nicholas Taleb, author of “The Black Swan,” said “every single human being” should bet U.S. Treasury bonds will decline, citing the policies of Federal Reserve Chairman Ben S. Bernanke and the Obama administration.

It’s “a no brainer” to sell short Treasuries, Taleb, a principal at Universa Investments LP in Santa Monica, California, said at a conference in Moscow today. “Every single human being should have that trade.”

...and the riposte by reality:

NEW YORK, June 1 (Reuters) - Europe's sovereign debt crisis may have finally tamed some of the most bearish traders in U.S. government debt, which just scored its best month in more than a year.

Growing fears over the heavy indebtedness of Greece, Spain and other euro zone nations have fueled a stampede into perceived lower-risk investments including Treasuries, cash, and gold since early April.

But until very recently, there had been a stubborn group of investors and traders who believed the intense safe-haven demand would fade. They also believed the market would focus on improving U.S. economic fundamentals and the United States' own fiscal predicament, sparking a Treasury sell-off that would push up bond yields.

So far, however, there has been no sign that the flight-to-quality bids for Treasuries are abating in the wake of Fitch Ratings' removal of Spain's coveted AAA-rating last week.

Data also pointed to little chance of inflation rising in the next couple years, while the Federal Reserve has signaled it is in no hurry to raise short-term rates.

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