The curve has been flattening pretty steadily for a year now, so a six-basis-point steepening is a big deal.
This might sound like mumbo-jumbo to someone who isn’t all that familiar with the bond market, so let me be succinct: You do not want to hold long-term bonds when inflation expectations start to ramp up. I have a feeling that people are going to find out the meaning of duration.
I have said this before in Street Freak. We are going to look back at negative yields and say, “Yup, that was a bubble.”
It’s a bond market bubble—complete silliness. Holding paper with no or negative yields when inflation is steaming ahead flank speed is unwise, to say the least.
Admit it: the risk-reward ratio here is terrible. What do you think will be the real rate of return, after inflation, on a 30-year bond yielding less than 3%? 30 years is a long time.
If you asked me what the dumbest thing in the market is today, this is it.
All the Evil of This World
I am very pleased and thrilled to announce the publication of my second book: All the Evil of This World.
I believe that this is the first book of its kind: a Wall Street novel of real literary quality. There exists Wall Street fiction, but it tends to be of the financial-thriller genre. And the rest are non-fiction and memoirs. Here is the cover copy, which will tell you what it is about:
There are humans behind the big, bad investment banks. There are humans behind the calculations of Wall Street. There are humans behind the legal and illegal financial manipulations in the news. They’re not always the best humans, and they’re not always the worst humans, but All the Evil of This World tells their stories with abundant curiosity, empathy, and honesty.
On March 2nd, 2000, the technology company 3Com spun off its insanely profitable hand-held computer subsidiary, Palm. It was one of the most high profile, complex, and bungled trades in history, and it’s a story about much more than the millions and millions of dollars that instantly came into play. All the Evil of This World tells it via seven separate voices from seven separate players, including an ambitious low-level clerk fresh out of school, a drug-addicted, party-throwing broker with bad taste and gross amounts of money, and a seemingly infallible hedge fund manager tortured by his own good luck. The 3Com/Palm trade is what weaves their stories together. They all collide into it and out of it, and it sometimes unites them, implodes them, saves them, or destroys them.
It isn’t for the faint of heart—these characters are just as troubled and intense and volatile as their surroundings, and not a single punch is pulled—but it’s an examination into a cast of characters that we rarely examine fairly or patiently, and who we often find it too easy to dehumanize. The people who inhabit this world aren't cartoon heroes or villains—as it turns out, they’re just like us.
There’s no other book that captures how real, how raw the world of trading is.
It’s also an interesting piece of historical fiction, about what the markets were like 16 years ago, when open outcry was at its peak, before technology, before decimalization.
A warning: If you wouldn’t see an NC-17 movie, you might not want to buy this book. It is graphic, jarring, and relentlessly dark. But if you think you can handle it, it might be the most important financial book you will ever read.
It’s available for pre-order on Amazon (and other places) in e-book form right now. The hard copy will be available for sale when it is released on June 21, if you’re the kind of person (like me) who likes holding a physical book.
I’d be honored to have you read it.
Jared Dillian is editor of Mauldin Economics' The 10th Man.