Wednesday, May 1, 2013

Right now, my preoccupation is with bonds.

As followers may note, I am very underweight and this despite my being bullish on them.  My main case is that growth will be low and so bonds (in particular long bonds) offer reasonable value even though rates are very low.

My problem is that I sold them at a good time on a rally) but then never bought them back when we got the dip.  I was waiting for a slightly better price and lost the forest for the trees.  In trading parlance, I was being (my apologies in advance for any young readers) -  a d**k for a tick.

This rather harsh self-assessment is always a hindsight reflection and is of dubious help in doing better next time.  Nevertheless, I find myself in a difficult position because, looking at TLT as a guide, this is where I sold my bonds and I find it difficult to buy them back right here because there could be a pullback to the 118-119 level.  My rationale is:  US government bonds are safe haven assets and part of their bid recently is money fleeing Europe which is still in a difficult spot.  I do not expect that to completely go away, but I was thinking that we may get some good news for a few days and our bonds would get hit, creating the buying opportunity.  The other possibility for a down draft would be asset allocation away from bonds and to equities as they keep marching to new highs.

Probably the smart thing to do would be to buy some TLT here to reduce the size of my bet, but I'm going to wait it out.  In the meantime, I run the risk that some pice of bad news will get TLT to much higher levels.


MRK, getting hit today.  Good current results, but they guided expectations down for the balance of the year.  I look at this is a quality stock on sale.  Buy it almost 5% cheaper than yesterday.  I like adding here.

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