Reflections: "Bonds Are the Truth"—And Other Lies I Was Told
The Dollar & Bond Yields: A Correlation Traders Love But Shouldn’t Trust
When I first got into trading, everyone told me the same thing: "Bonds are the truth. Everything else lies."
Sounded weird, so obviously, as a weird kid, I had to learn more. If bonds were the truth, I needed to know them inside and out.
This was how I was going to make all the money in the world.
Truth #1: Buy Bonds, Never Lose Money
Yeah, about that… Look at the last four years. If you believed that one, you learned the hard way. Just because something worked in the past doesn’t mean it keeps working.
Truth #2: Bonds Go Up When Stocks Go Down
As a young trader in 2008, this sounded perfect—buy these magical things, and my portfolio is always protected.
Then 2022 happened. Inflation hit, and both stocks and bonds got crushed—down over 25%. So much for that "truth."
Luckily I learned that lesson many years ago and I was one of the only traders shorting bonds in 2020.
You all who have been with me for awhile remember all the shit I got for calling that blow off top in bonds a generational top in March 2020.
Truth #3: The Dollar & Bond Yields Always Move Together
This one keeps coming up. I keep saying inflation is sticky, and the dollar is rolling over. People keep asking how that makes sense when the dollar and yields have been tracking each other with a 75% rolling correlation recently.
Here’s the reality: Correlations come and go. Betting on this link staying intact? That’s a trap.
Just because something has happened in the past does not mean that it has to continue.
This correlation changes constantly over the years as you can see on the chart.
The Truth Is…
It’s an inflationary environment—just look at commodities vs. stocks.
This is why relative performance matters. It’s a simple equation:
Line goes up? Inflation rising.
Line goes down? Inflation slowing.
If inflation is sticky, bonds struggle. That’s the game right now. Until that changes, portfolio positioning is everything.
Fridays are for portfolio allocations:
If you want specific trades, you know what to do.
But this will give you a clear look at how I’m positioned in the long term portfolio—tracking trends as they develop each week.
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