May

4

What is the real significance of this? Is the sage that clueless that you can't short something riskless and that treasury bonds the second biggest market in world? Or does it relate to waning support for cattle trading?

Buffett Says He'd Short 30-Year Bond If He Had Easy Way to Do It

By Doni Bloomfield (Bloomberg) — Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., reiterated his belief that it's not worth buying long-term bonds at current interest rates and said he expects the value of the securities to fall. "If I had an easy way, and a non-risk way, of shorting a whole lot of 20- or 30-year bonds, I'd do it," Buffett said Monday on CNBC. "But that's not my game, and it can't be done in the kind of quantity that would make sense for us. But I think that bonds are very overvalued, I'll put it that way."

anonymous writes:

"If I had an easy way, and a non-risk way, of shorting a whole lot of 20- or 30-year bonds, I'd do it," Buffett said Monday on CNBC. "But that's not my game, and it can't be done in the kind of quantity that would make sense for us. But I think that bonds are very overvalued, I'll put it that way."

One recalls that his track record included some rather gigantic bets made on the long side in treasury strips.

The notion of not being able to figure it out seems clownish. 

anonymous writes:

A few Monday morning thoughts:

1. Next month will be the 11th anniversary of the beginning of the last Fed tightening cycle. That tightening cycle last 24 months and ended in June 2006. So, it has been 9 years since the last fed rate hike to 5.25%. Do you remember the world before Facebook, Twitter, HFT, ETF's, Barack Obama, Windows 7, and a few other things? Do you realize that Steve Jobs unveiled the iphone to the public on January 9, 2007? Is it imaginable that EVERY iPhone in existence has never experienced a Fed rate hike?

Remember: Plus ca change, plus c'est la meme chose.

2. There was an interesting Bloomberg news story for German bond bears over the weekend — and the unintended consequences of negative nominal interest rates. In a nutshell, if you short German bunds, you receive cash (if you are not leveraged). You then must invest the cash in overnight money markets. But, oops, there are negative interest rates in the cash markets too. So you are paying to hold onto the cash. And if you do the trade in the repo market, you still need to post margin in Euros — and that margin gets paid a negative interest rate. All of these moving parts (eventually) get arb-ed out into the derivative markets — for swaps and esoterics wise-guy trades. The bottom line: If you are good, short/intermediate term trader, you can make money trading bonds/bunds/jgb's etc on the short-side; but unless a central bank is tightening, unless there is a sovereign default fear/currency crisis, setting up structural shorts in fixed income is a very difficult game — due to the negative carry that exists despite negative interest rates. This is probably what Buffett means when he says that there is "no easy way" to short long bonds.


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  1. anand on May 4, 2015 12:42 pm

    I wouldn’t get hung up on the technicalities (or semantics) of what he said .. IMO its just PR spin, nothing more. His image has been built on portraying himself as a simple joe who has made a few bucks through hard, honest hard work over decades and decades (the amercian grand-dad farmer image similar to that portrayed by uncle ben in spiderman https://www.youtube.com/watch?v=iRJiF1lnGO8). The image is especially helpful in a business populated by smart arse spivs who show themselves up in a predictably cyclical fashion. It helps to cultivate such an image when you’re running one of the most powerful financial institutions in the world … & want to ride over trivial matters like anti trust legislation (in fact you can be actually applauded as a saviour when you buy up a busted out financial institutuion which has been blown up by above numbskull spivs). take a look at goldmans for a perfect example of what happens when you portray the diametric opposite image .. you become public enemy no 1.

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