How Much Longer Can Speculators Get of Bonds?

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The last six months has seen one of the most incredible changes in investor positioning in 10-year US treasury bonds in recent history. Back in early January, around the time rates peaked, non-commercial traders (AKA speculators) were net short 10-year options and futures contracts by a whopping 17% of open interest. Fast forward to today […]

Our Contrarian Call: A Bullish Thesis on the Energy Sector

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Back in December 2016, we discussed our expectation for lower longer-term US interest rates, which we used to justify an aversion to financial stocks. This expectation played out. We also discussed our rotation into the resources sector. We suggested that sometimes rotations can be bumpy, and indeed the last six months has been a bumpy […]

Risk Management 101: Diversification (Easier Said Than Done)

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There are three basic ways to manage the risk of an equity portfolio: Diversify, by owning a collection of stocks from different industries Hedge, by shorting stocks or equity futures Buy insurance, like buying an out-of-the-money put option. The essence of diversification is choosing assets that are not perfectly correlated with each other. The logic […]

Coming Challenges to US Treasury Investing

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In the table below we show the aggregate US Treasury maturity schedule. Due to stops and starts of the US Treasury issuing longer dated bonds over the last few decades, there is a huge gap in maturities available for investors. The reader will notice that there are no US Treasury bonds due to mature between 2028-2042. […]

It’s a Gusher So Far

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So far in this earnings season, with over half of companies having reported, the energy sector has experienced the biggest earnings surprise. Earnings have come in almost 23% ahead of analyst estimates, nearly double the surprise of the consumer discretionary sector. Digging into industry groups, with 6 out of 7 companies in the S&P 500 […]