Long-duration bonds are cheap. EDV & TLTInflation has come down down, FED is planning to begin cutting rates this year. Interest rates are the highest in the US of any developed country. Long term bonds especially are a good investment here. EDV and TLT both track them and are currently paying a good yield too. I expect these to double from current prices over the decade. The next time things break and the FED is forced to cut rates more aggressively, these will be up huge
EDV trade ideas
Long Bond CallWe haven't had to manage cycle risk, on a sustained basis to the downside, since 2008-2009 and 2000-2002.
The biggest problem in financial markets right now is there's no Event.
This is just Cycle-Risk and we haven't had to manage cycle risk - on a sustained basis to the downside - since '08-'09, and 2000-2000 before then.
The Fed is in QT. Financial conditions are still in accommodative territory, according to the Financial Conditions Index, and we have a long way to go.
We will not see any dovish actions from the Fed until the economy deteriorates significantly.
I'm convinced we're past the peak in terms of inflationary pressures.
Looking at our portfolio, the #1 thing we aren't allocated to is duration.
I think the long bond could rally 20-30% from here. I think when it moves, it's not going to let you back in the trade.
The world is short-duration right now. Tons of cash on the sidelines. The dollar rising has been supporting U.S. equities.
When it deflates, there will be a significant change in style factors. Expect a significant reversal in sector and style factors ahead.
Simple rule on when to enter a long bond trade:
It's compelling, given historical backtest, to go long the long bond when the year-over-year inflation rate peaks. (18-20% annualized)
YoY Inflation data:
fred.stlouisfed.org
NFCI:
fred.stlouisfed.org
More downside for long term durations It appears that there is at least 15% more downside to EDV before a possible trend reversal. I have two separate channels made up. If support fails EDV may find it self within the lower channel. The long term economic picture still seems to be uncertain. With more clarity coming with time. A bounce or failure at the long term support could very well happen within the next 2-6 weeks.
EDV: Bond Market Rally ResumingIf precious metals aren't the thing for you, the classic investment hedge for safety is holding bonds and bond funds. I like EDV a lot and it holds its value steady long term for the buy/hold/rebalance crowd. Bonds cooled off a little after the late August rally lost some steam, but it looks like its picking back up after the worry about global recession looms again. If you want some fixed income style safety, look to EDV as well as other bond funds out there.
EDV - Bullish breakout, bad new for S&P?EDV has done well since the S&P cooled off at the beginning of the year. The two have a predictably negative correlation, however, even though the S&P has been doing relatively well since mid-February, a weak pennant has formed in EDV and there are signs of a positive breakout.
EDV play (TLT same thing)1. If breakout, buy with stop. If breakout confirmed, buy more.
2. If dips, wait until lower trend line (support) is hit. If support holds, buy this dip with stop and hold (if worked) until upper trend line (resistance) is hit then go back to 1.
If aggressive, can short dip, short broken support.