Risk/Reward Vol. 395
THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.
Below are my two most recent missives sent last summer. I stand by both.
I continue to rotate into short term bonds (mostly Treasuries) in anticipation of more rate increases by the Fed. The September dot plot indicates that the Fed will raise Fed funds (overnight lending) rates once more this year and three times next year. Thus, overnight rates should be 3-3.25% by year end 2019. If current rate spreads hold, one should receive nearly 4% on 2 Year Treasuries at that time. TINA (There Is No Alternative to stocks) no longer rules supreme. There Are Real Alternatives! (TARA?) Predicting yields on longer duration bonds is more difficult given that they respond to stimuli in addition to overnight rates such as inflation, economic growth, foreign spreads, etc.
Second, I do believe that "Winter is Coming" in the form of the midterm elections. If you believe as I do that the Democrats will secure a majority in the House of Representatives, then I predict that we are in for a very rough ride. If they are comfortable besmirching Kavanaugh, just imagine what Democrats can and will do to Trump once the inevitable impeachment proceedings begin---and they will begin. Moreover, I foresee Trump resisting Congressional subpoenas thereby forcing the judiciary's involvement. If that weren't crazy enough, I see the need for judicial involvement triggering an impeachment proceeding against Kavanaugh if he does not recuse himself.
Is my "Winter is Coming" scenario farfetched? Will Mr. Market even care if it comes to pass? Who knows? But at age 67 I see no reason to be at risk. I am ensconced in the safest income producing haven possible---U.S. Treasuries.
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