Everybody Hurts (R.E.M.)

I don’t think the market is about to break but many money managers may.

Peers are speculating whether there are big funds unwinded losing and problem positions.

Perhaps so but that often coincides with the ‘straw which broke the camel’s back’.

Many thought buying government bonds yielding 0.60% for 10 years to be a good bet.

In fact, many thought buying German bonds for a NEGATIVE 0.60% (as shown in orange in the chart below) was somewhat appropriate.

And their reward is………..a 20% loss of capital (with no interest coupon paid), as shown by the blue line of a German Bond (SDEU) ETF.

When you consider that “balanced” funds including those in the pension or insurance business may typically follow a model of allocating 60% of monies to equities and 40% to bonds, they may be double hurting as Germany’s DAX equities Index has fallen 24% from its peak.

That’s the reporting of what happened bit.

Now, many think this is ‘forever’. Many think trends and streaks don’t end, wane or reverse.

Consider the contrarian view to the extremes we are seeing?

September 27, 2022

by Rob Zdravevski

rob@karriasset.com.au

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