'It's the greatest short in history'

Christopher Joye

In The AFR I argue that loading up on long-dated interest rate duration across any asset-class---including the massive amounts embedded in equities, fixed-rate bonds and property---when yields have been at the lowest levels in human history is a self-evidently crazy-brave trade akin to financial Russian roulette with probabilities tilted towards savage losses: "In the first 14 days of September, AAA rated Australian government bonds lost 1.5 per cent of their value even after accounting for their miserly yield. Blindly loading up on duration by following the mad mantra of "bonds for growth and equities for income" is as silly as the RBA claiming that cooling housing conditions gave it room to cut rates in August. "It's the greatest short in history," exclaimed the Phoenician honcho at a $2 billion hedge fund a few weeks ago. He was referring to interest rate duration. "No sh-t," I responded. "I've been telling you the same thing for years." While my friend's timing proved to be impeccable, he would be the first to admit this was pure luck, not skill. Free (VIEW LINK)


Christopher Joye

Christopher Joye is Co-Chief Investment Officer of Coolabah Capital Investments, which is a leading active credit manager that runs over $2.2 billion in short-term fixed-income strategies. He is also a Contributing Editor with The AFR.

Expertise

equities inflation interest rates rba bonds hedge funds housing

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