In November 2016, the Chicken Little Portfolio lost 4.67% while the Dow Jones Industrial Average gained 5.94%. The US bond market is in the midst of an enormous decline.
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| President Elect Trump had a HUGE impact on markets |
November 2016 performance
Chicken Little Lost 4.67% in November because of a decline in the price of long-term US Treasury bonds. In November, US stocks enjoyed tremendous gains.
| Nov 2016 | 2016 YTD | Since Inception (3/31/2016) | |
| Chicken Little | -4.67% | -1.84% | -4.29% |
| Dow Jones Industrials | 5.94% | 12.32% | 12.02% |
Every other asset class tracked by Chicken Little lost money in November. Stock markets outside the US lost value in the month. Finally, the 'safe havens' of gold and treasury bonds each lost more than 8% in November.
There will be a longer post on bonds in the future. For now, there are three points.
a) Chicken Little would have sold every bond if he knew they would crash so soon.
b) Chicken Little is a saver with the majority of his money in cash and shorter term bonds. Nothing makes a future bond buyer happier than lower prices.
c) The losses are real, but losing money on a bond you plan to hold to maturity is different than losing money on a stock.
| Asset | Symbol | Nov 2016 | YTD 2016 |
| Dow Jones Industrials | DIA | 5.94% | 12.32% |
| Non-US Stocks | EFA | -1.78% | -1.29% |
| Emerging Market Stocks | EEM | -4.42% | 11.11% |
| US Long-Term Treasury Bonds | TLT | -8.20% | 1.83% |
| Gold | GLD | -8.36% | 10.14% |
US Bond Market Crash
U.S. long-term government bonds have crashed over 16% since their peak in the summer. This price decline has been almost unnoticed in mainstream financial media.
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| US Bonds have crashed without Headlines |
Chicken Little wrote about the coming change in the bond market in a number of posts earlier this year:
August 11, 2016: Chicken Little ends his love affair with bonds.
September 19, 2016: The Bull Market in Japanese Bonds is over.
October 3, 2016: Change in the Bond Market?
October 3, 2016: Change in the Bond Market?
November 4, 2016: End of Central Bank Tailwind. Fasten your seat belts.
Why own bonds before a crash?
If Chicken Little had soured on bonds before the crash, why are there so many in the portfolio? |
| Bonds have been painful |
There will be a longer post on bonds in the future. For now, there are three points.
a) Chicken Little would have sold every bond if he knew they would crash so soon.
b) Chicken Little is a saver with the majority of his money in cash and shorter term bonds. Nothing makes a future bond buyer happier than lower prices.
c) The losses are real, but losing money on a bond you plan to hold to maturity is different than losing money on a stock.
What does the bond market crash mean?
There are two prevailing views.
1. Under President Trump, the economy will be better.
2. Debt crises all end with rising real interest rates.
Immediately after the election, Chicken Little recognized the positive impact of Republican control on US corporate profits. Nevertheless, Chicken Little wouldn't be chicken & little if he believed in #1.
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