Who Exactly Are The Bond Vigilantes?

(11min)

Summary

  • US deficits and debt are unsustainable. With bond vigilantes returning and yields rising, the US risks a fiscal crisis if deficits aren't addressed.
  • Avoid long-dated US Treasuries; prefer floating rate, short-duration bonds, foreign stocks, and high-quality companies with pricing power.
  • S&P 500 forward returns look weak—we expect just 3.5% annually in the base case, with high valuations and rising yields pressuring valuations.
  • Diversify with high-quality compounders, foreign bonds, real estate, and energy; gold is overbought, and crypto remains too speculative for my portfolio.
  • Looking for a helping hand in the market? Members of Cash Flow Compounders get exclusive ideas and guidance to navigate any climate. Learn More »

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It has been decades since we've seen much from the bond vigilantes. This is not an organized group; to be clear, it is simply the machinations of the US bond market (or any bond market really).

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This article was written by

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Thomas Lott started as a portfolio manager at a hedge fund in 2003 and has worked as a financial professional for over 30 years. Thomas espouses Graham and Dodd/Buffett style investing, always on the lookout for high-quality equities at attractive valuations. He is a graduate of Vanderbilt University with an MBA from Northwestern's Kellogg School of Management.

Thomas leads the investing group Cash Flow Compounders where, along with NJ Value Investor, he aim to find the best companies in the world that are trading at attractive valuations. Features of Learn more include: their exclusive portfolio of compounders, 2-4 in-depth new ideas a month, live chat, and direct access for questions. Learn more.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of GOOG either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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