Black Swan Cattle Co.

A new Island has appeared in the Far East. "The House"

Lots of hot takes on 3% real yields. Here's my cool calm take sent to clients of dampedspring and 2Graybeards. (Details in pinned tweet for subscriptions) 3% real is not some magic level. I am going to begin scaling into long dated tips as planned for beta and add some long zb trades for alpha at some point but its not magic and calling it a "generational" buy is overly confident. It is pretty attractive though and here's why. 1. Historically high it's only once been higher in U.S. tips history and only stayed high in the early days due to lack of interest and novelty (10 year tips were issued and traded in the 4's for a while) 2. Fundamentally pretty cheap. The idea of real risk free bonds Is they should track pretty tightly real growth over time. Real growth of 3% is very high in a world of 50bp of work force growth and long term productivity growth of 1.0%. So there's no magic level. I think 3% is cheap and will buy but supply of treasuries from QRA extending the debt, balance sheet adjustments by the fed and corporate capex funding is bearish and could push yields 25-50bp higher for absolutely no reason more than that However 3% is expensive real issuance costs which is a tightening and if it goes higher equities, housing, and the economy in general will have downward pressure on growth. So tips are a good addition to a diversified portfolio.