US Treasury Bloodbath Soaks Fund Managers

[Grenville]

http://www.cnbc.com/id/31128840

 

Interesting comment

 

"If I were clairvoyant and knew we were going to have a sell-off of this magnitude, I would've been all in cash, but I'm not," said Van Hoisington, whose flagship Wasatch-Hoisington U.S. Treasury Fund is down more than 20 percent.

[arbitragr]

Yeah I mentioned a simlar thing about the bond market here: http://cornerofberkshireandfairfax.ca/forum/index.php?topic=652" data-ipsquote-contentclass="forums_Topic" 5425#msg5425

 

Long term govt treasuries were in a bubble, due to sheer fear. If you're getting negative real yields (after inflation) there's no way govt bond prices are going to be sustained at the high levels that we saw a few months ago, and thus a sell off was bound to occur.

"If I were clairvoyant and knew we were going to have a sell-off of this magnitude, I would've been all in cash, but I'm not,"

 

I would disagree with this quote, and say that better yet ... a bet, by shorting long term Govt. bonds would have been a good one (as opposed to cash) during the point of maximum fear we saw in Q408 or Q109. Contrary to popular opinion, long term US Govt. bonds were one of the most riskiest asset classes for investors. If the US Govt. were a company, I think Moodys and S&P would have downgraded the govt. to "junk status" by now. If a fund manager had invested in long term govt bonds during Q109, I would be really skeptical about their ability to invest, and would question whether they are just following the herd and accumulating assets.

 

As a good illustration one of the bond instruments I'm in; TBT, an ETF for the inverse performance of long term US Treasury Index (i.e. shorting long term govt bonds) has been up quite a bit since the March lows.

 

http://i163.photobucket.com/albums/t314/ripleyx/tbt.jpg

 

The bond markets have been where all the action is during this credit crisis.

Nonetheless, I would venture to guess that we will continue to see a sell off in long term US-Govt bonds as the economy recovers.