Long Term Bonds and Australian Mice are trending...stocks are not.

Aug 20, 2021

What I’m Listening To…

This may be the best podcast I have ever listened to. Kat Cole, was the oldest sister of three kids, when her mom took her away from her alcoholic father (she was in several car wrecks when her father was driving). Fast forward to today and she has been the CEO of several brands that you will recognize. Her journey from Hooters waitress to CEO is fascinating and a must listen for everyone.

The Knowledge Project: The Power of Possible with Kat Cole

What I’m Writing About…

If you don't adapt, prepare to be disappointed

The Rundown

Afghanistan

Vaccine Efficacy and Immunization Rate

Markets

The markets are very noisy and sending mixed, if any, signals. Here is a taste of some of the commentary out there.

McClellan Oscillator: “We are seeing divergences everywhere which call into question the viability of the uptrend”

LeadLag Report: “Even though the S&P 500, once again, pushed higher and added another 0.8%, it was the risk-off asset classes that ruled the week…the markets have been indicating a defensive posturing for several weeks, but last week’s more decisive move towards risk-off conditions could quickly begin picking up steam.“

Charts In Focus

High Stock Ownership isn’t a great sign

Tesla is worth 3.5x more than GM and Ford? Combined?

Long-Term Bonds (ILTB) vs. Short-Term Bonds (ISTB)

I like to look at subsets within an asset class to see what kind of advantages that can create. Owning ILTB when the red line is greater than the black line and ISTB when the black line is greater than the red line, does create a lift in returns on this backtest (past performance is not a predictor of future results). I also find the channel and the abrupt shift to Short Term Bonds in each case quite informative.

High Yield Bonds (HYG) vs. Long-Term US Treasury Bonds (TLT)

A more fascinating look, especially when bonds are so out of favor, is this analysis of High Yield Bonds (which have a decent correlation with stocks) and US Governments bonds that mature in 25 years or greater. The back test of switching appears effective and actually outperformed the S&P 500 during the time period under analysis.