The Message from Bond and Stock Prices


Dear Reader,

Stocks are at all-time highs, and so are bonds.

Although, this is happening for two very different reasons: stocks are at all-time highs because the markets are pricing in more stimuli from central banks, as well as the fake jobs numbers that point to an economy that is, at least on the surface, stable.

Bonds, on the other hand, are pricing in absolute devastation coming to the markets. Yields have collapsed, and prices are hitting new highs.

Without even going into the underlying fundamentals of our economy, even a novice investor could look at just the political landscape and tell you that economy is not at the rip-roaring state that you would expect from all-time highs in the Dow Jones and S&P 500.

There is also something else that is very disturbing about this rally in major indexes. And that is the volume… the S&P 500 is trading at 25x reported earnings, and retail equity funds are selling big! The outflows during this rally don’t make sense at all. Typically, rallies are supported by buying volume, not selling pressure.

The next crisis will be ten times worse than the 2008 financial panic due to all of the central banks’ intervention of the last 8 years. It’s important to be prudent and disciplined in this environment.

We never want to make an investment decision based off of a prediction of the economy, but I think it’s also obvious that the helicopter money has already started in some parts of the world.

Do NOT short these markets. In our opinion, during times of a currency crisis, it is important to note that stock indexes usually see new highs and continue to make all-time highs, even in nations that see a full-blown collapse and hyperinflation.

Stocks, in the end, are backed by real assets, so though we believe the relative value upside in major indexes is minimal, the nominal price of the Dow Jones could be headed to 30,000 due to what’s coming from the central banks.

Best Regards,

Daniel Ameduri

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