Haphazard Linkages

Quick rallies make me a little more skeptical than usual. The bond markets seem to tickle the skeptic in me. In times of doubt, I turn to history for a new perspective through which to view the present moment. As I browsed through the past, I chanced upon this article on the Great Bond Massacre of 1994 . As with almost all instances, the 1994 bond market episode is instructive as much for the parallels with the present moment as for the uniqueness. Back then, as today, bond yields were at historic lows and inflation was muted. Wages were subdued and companies were struggling to raise prices. At the same time, idiosyncrasies exist, making the comparison an interesting and instructive exercise. In 1994, euphoria ran high and the big spread between short and long rates saw speculators loading in on the carry trade (borrow short, invest long). The Fed kept rates low as the Clint on administration contemplated ways of slashing the deficit and Mr. Greenspan worried about inflation. Then

I have always loved writing. Investing, it turns out, provides ample opportunities to pander to the writer's urge in me. Apart from serving as a repository of my misses (which have been way more instructive than the hits), the blog has been a storehouse of investment conjectures over time. I strongly believe the best gauge of one's guessing ability is to periodically note down investment conjectures and test them against reality. This has helped me get better at guessing over time. One can never get everything right all the time (I have had the good fortune of numerous humbling experiences), but net-net if one's guessing right, I think things will be alright over the long run. Below are excerpts from my writings in the past. A check of predictions versus subsequent performance. The following was written on July 31, 2007 when the S&P 500 index was ~1,500. Credit spreads have widened sharply over the past few months after bottoming out at historic lows, but the