Bonds: The Mother of All Bubbles

Published on
September 24th, 2019
9 minutes

Bonds: The Mother of All Bubbles

Trade Ideas ·
Featuring Michael Gayed

Published on: September 24th, 2019 • Duration: 9 minutes

Michael Gayed, CFA, portfolio manager at Pension Partners and author of the Lead-Lag Report, updates his thesis on reflation, and reviews where he thinks the yield curve is headed next. In this interview with Jake Merl, Gayed breaks down the Fed's decision to cut interest rates, highlights why more quantitative easing may prove bearish for bonds, and notes which sectors should outperform in the months to come. Filmed on September 23, 2019.



  • IC
    Ibrahim C.
    25 September 2019 @ 02:44
    Having seen that some parts of the world have already been in recession and the same would be in countdown to USA, I could not agree with this view that "the time will show the reflationary impact on rates". While saying that "the CBs are very creative in doing whatever it takes", the views in this interview do sound a bit contradictory. We are all politicized now and how long this manipulated era would last, nobody knows? But after reading the transcript of Ken Grant's Expert View, we have very long time to live through these interesting times. In a nutshell, I am long in Yields and especially 30T Year Treasury Bonds (ZBZ19) will eclipse the latest top.
    • JS
      John S.
      8 October 2019 @ 18:29
      Until inflation data turns north, long treasuries and proxies should continue to work. In that event I'm 100% ready to take profits but I think this guest is looking at the wrong things and frankly wonder why he believes (following years of global QE, ZIRP, NIRP, and diddly squirt) CBs will suddenly grab the elusive, reclusive, ever reluctant, golden ring of inflation. I'm open minded...but only to a change in the direction of the data. All else is pure distraction.
  • JS
    John S.
    8 October 2019 @ 18:12
    I'm not wrong on EM just early. The reflation trade will work "because it's time". The Fed will do whatever it takes to steepen the yield curve. Just curious...does this guy ever look at economic data or is he permanently fixed to valuations and/or beliefs that an idea will work because _____ ?
  • TS
    Trevor S.
    26 September 2019 @ 18:35
    I've been following Lumber/Gold for a while. Much appreciated for your paper there as it has helped with leading signals! However, looking at it now (up through 9/25), I don't see any significant uptick that suggests it's bouncing back. Still bottomed out from what I can see at 0.24. At what level would it appear the downtrend is over? 0.30?
  • dd
    david d.
    24 September 2019 @ 13:00
    this guy has been very wrong in 2019
    • CB
      Chris B.
      24 September 2019 @ 13:24
      Yes, I think RV should focus themselves on finding traders who are always right.
    • MG
      Michael G. | Contributor
      24 September 2019 @ 13:25
      Wrong about what exactly?
    • TM
      The-First-James M.
      24 September 2019 @ 22:18
      Chris B, such a thing dpes not exist. Hoping (for your sake) that your comment was tongue in cheek and that I've taken it out of context.
    • AF
      Andre F.
      26 September 2019 @ 05:45
      Chris B. I really hope that what you said was an example of dry humour.
  • CC
    Chris C.
    24 September 2019 @ 15:35
    Real vision has started to automatically roll into another video everytime I watch one. I hatd this feature. If I dismiss it, it still comes back again to START the same video or another. Help me get rid of this feature. I could not find a phone number to call or any other way to commu locate this annoying problem.
    • RA
      Robert A.
      24 September 2019 @ 16:26
      Chris, FWIW I have always found Milton to be extremely helpful and responsive to these types of concerns. You can easily just click on Milton and start a conversation—he will get back to you fairly quickly.
    • GF
      Gordon F.
      24 September 2019 @ 19:27
      I absolutely agree. I find this "feature" to be infuriating. If the RV programmers feel it good to have as an option, they should give viewers an easy and obvious way to opt out of it on a PERMANENT basis.
    • AF
      Andre F.
      26 September 2019 @ 05:41
      Thank you for saying so. I can't stand this feature either. It's infuriating and puts me into an absurd situation of fighting with my computer (I don't need added stress in my life.) When I'm finished watching a piece on real vision, I either want to reflect on what i just watched (which means I need silence) or I want to make my own choice about what (if anything) to watch next. I'm not a teenager with a low attention span. I don't need endless stimulation from an auto-play feature!
  • MS
    Malcolm S.
    25 September 2019 @ 04:06
    Skeptical of anyone whose rationale is "because it's crowded". No basis for his thesis besides taking the contrarian view.
    • DD
      Dmitry D.
      25 September 2019 @ 09:28
      Well, remarkably, "playing against the crowd" trade (shorting most crowded stocks and buying the most shorted stocks) is among the most consistent alpha generators for many a year. Besides, what he is talking about, I believe, is not "play against", but simple pay-off asymmetry. I found his ideas clear and logical, even if I do not agree with some.
    • JW
      Joseph W.
      25 September 2019 @ 09:37
      Gaussian distribution :) it's all about finding the right way to gauge sentiment. that's where most people get lost.
  • MS
    Michael S.
    24 September 2019 @ 21:15
    Can't say I disagree over some time horizon. It's seems unlikely the Fed is ready to announce QE 4 before they've lowered rates once or twice more. While they dither, yields will continue to fall. Graveyards are full of speculators that were too early.
  • TD
    Thomas D.
    24 September 2019 @ 17:25
    I would like to know how much Mr. Gayed expects the 10y yield to correct before resuming its down trend. I enjoyed the presentation.
  • SV
    Steven V.
    24 September 2019 @ 16:29
    When the Fed starts to cut rates or ease monetary policy while the prior cycle tightening is hitting the economy, due to the monetary lags, yields fall across the curve and a recession ensues. QE is bearish for bonds, but not until the prior tightening cycle has been counteracted, so Gayed is right, his call is early. Very early. Yields will have to fall which will cause financial conditions to tighten before we get to QE and enough QE to actually cause yields to rise. The notion there is pent up demand after a ten-year expansion is a bold call.
  • IS
    Ionel S.
    24 September 2019 @ 11:27
    This belief in the Central bank put is so consensual and so dangerous!!! "The Fed will steepen the curve at any cost" ( at the end of the interview) shows how much complacency and myopic are the investors at the end of the cycle. I fear the steepening of the yield curve!... especially the bull steepening, because this triggered recession each time. Over the last 13 easing cycles sice WWII, Fed only managed to soft land the economy 3 times! Why betting on the low probaility event?! "Dont fight the FED", right? because "this time is different"!
    • MG
      Michael G. | Contributor
      24 September 2019 @ 13:26
      Appreciate you watching.