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‘One percenter depression,’ giant sector rotation. Kupperman on bond


“There is no magic level of yields that, when reached, will automatically draw in enough buyers to spark a sustained bond rally.”

That was Barclays’ head of macro research, Ajay Rajadhyaksha, warning clients Wednesday that only a stock selloff will stem the bond bleeding. Add to that Pimco co-founder Bill Gross, who notes that “spooked” retail investors have started dumping their massive holdings in bond exchange traded funds.

Also read: Gross says investors should shun stocks and bonds and buy this asset instead

The sum of all that is that patience for this to play out, even if you get the call:


@Fullcarry

H/T to Kevin Muir of the Macro Tourist newsletter for spotting the above, which brings us to our call of the day, from his Wednesday interview with Harris “Kuppy” Kupperman, founder of hedge fund Praetorian Capital, who sees no bottom for bonds and prefers “real economy” investments instead.

A penchant for trading in manias, Kupperman nailed last year’s tech selloff but got burned on Russian trades. His Praetorian Capital Fund still returned 11% plus it had triple digit gains in 2020 and 2021, and is up 16% so far in 2023.

As for the bond market, he says it’s “not panicky at all.”

He said the bottom can’t be in while 10-year Treasury bonds are still inverted relative to shorter-term bonds, and said there’s no reason why the yield can’t go to 6%, a median area for the last 50 years, and then probably overshoot that.

Read: The chart that has one strategist convinced bond market is divorced from fundamentals

“I wouldn’t be surprised if it got back to the teens,” which he sees happening over time “unless our government has some fiscal sanity,” said Kuppy.

“Think how ridiculous it is that we’re running an effectively 8% nominal GDP, 8% deficits in the boom, probably like teens in the next recession…payroll tax was up 9% year over year for Q3, so the economy is really strong. So how is the 10 [year Treasury yield] at 4% and change? It makes no sense. It should have a 6% handle.”

But a 6% yield is a problem for the Wall Street guys it will make “insolvent,” due to the leverage they use — borrowing money to trade elsewhere. “And so you have these Wall Street guys crying and crying and crying, but my friends in the real economy, I mean it hasn’t been better for them. It really is a one percenter depression, that’s all it is,” he said.

Kupperman sees high yields causing pain at some point because many businesses have to fund themselves. “They did 5-year…



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