Why Do Bonds Go Up, When Stocks Go Down?

Uncategorized Jun 24, 2019

Investors view the world as either "Risk on" or Risk off."  When things look rosy in the economy, it's risk on and they jump into the stock market with both feet in search of higher returns. When things get scary and the economy shows signs of slowing, it's risk off and investors jump out of stocks and into the safety of government bonds. These bonds provide the worlds safest yields backed by the full faith and credit of Uncle Sam. The more Investors jump into bonds the higher the bond prices go which in turn drives down the yield of these bonds. This is why when the economy is at its worst, bond yields are historically at their lowest. So, why would Fed Chairman Powell talk about easing rates? Simple, because he fears bad things are coming for the economy! So, why are stock market investors happy and why are they jumping back into the stock market? Simple, because they are historically stupid and love to jump on the band wagon just as the wheels fall off, the music stops, and people get crushed. Historically speaking, you can see that stock prices and bonds prices are meant to move in opposite directions, but last week they were moving in the same direction and it caused a huge week for both sides. This situation should cause you to ask yourself, who is right? Both sides cannot be right, it is simply not possible! Cast your vote now and if you vote for the stock market investors then sometime in the coming months, you will know that you voted wrong.

I don't mind looking stupid, I don't mind being the little boy that cried wolf, and I don't mind being wrong for a period of time. Nobody can perfectly call the exact top or bottom of the market, and if you try to perfectly time your exit then statistically, you will miss on the wrong side and catch it on th way down which is much a much bigger drop.

We Do Love Some Stocks!

We like strong companies that have upside AND PAY STRONG DIVIDENDS over a sustained period of time. We love to sell call options against these companies and then buy protective puts so we can protect our down side. This is strickly a yield play. If the option side confuses you, and you don't care about it, just ignore it and consider only the dividend, but realize you risk the downside if the stock falls. If you are a long-term player and will live long enough for the stock to bounce back if we enter a true bear market, these stocks make a ton of sense because this is about collecting and compounding the dividend. If you don't understand the option side and want to triple your returns while limiting your downside if the stock does drop, please reach out to me at [email protected] We have a month to month program for as low as $59 per month that can make you an expert!! 

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