Historically, long-term treasury bonds (TLT) have been the most effective asset class for portfolio protection. Per the article below, leading Wall Street economist, Gary Shilling, “thinks the “Long Bond” is going to 2%,” and Bernanke says “Fed likely to add negative rates to..tool kit.”
ETF PM has long positions in TLT.
GARY SHILLING: The 30-Year bond is going to 2%
Myles Udland, 10/5/15
Gary Shilling thinks the “Long Bond” is going to 2%.
This weekend, Shilling was a guest on Bloomberg’s “Masters in Business” podcast with Barry Ritholtz and made a bold call on the future of the 30-year Treasury bond.
(The 30-year bond is referred to as the “Long Bond” because not only is it the longest-dated Treasury bond issued by the Treasury Department, but it is also the only bond issued by Treasury that is actually called a bond: paper in duration of two years to 10 years are notes, and the shortest-dated paper are bills.)
“In 1981, the yield on the 30-year Treasury was 15.21%, and I said in writing we’re entering the bond rally of a lifetime,” Shilling told Ritholtz.
“I saw inflation unwinding, and with lower inflation that would push down yields, pushing up bond prices. And I think we’re still in that. Yields now, obviously, have dropped a tremendous amount: We’re a little under 3% for the 30-year bond, and I think we’re going to go to 2%.”
….if I’m right and you go from essentially 3% to 2% on a 30-year coupon bond, you make 30% on your money, which I think is going to be a lot better than what’s in second place.
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