The piper will be paid, chickens coming home to roost, “Wolf!” etc.
The US and other governments have been living beyond their means, with massive deficit spending year after year, even during the good times of low military spending and high employment. We all know the bill needs to be paid, and the financial disaster approaches.
Chicken Little buys some long-term bonds
Chicken Little has bought some long-term bonds. After years of predicting rising interest rates (falling bond prices), I have purchased some 30-year US Treasuries (actually 24-year). Have I gone truly insane? Perhaps.
Here is the history of my position in US long-term Treasuries:
Here are the portfolio reports:
Today: 40%
Why buy bonds after a decade of criticizing US government fiscal and monetary policy? Shouldn't we all be fleeing bonds today? Here are three reasons why I think bonds have some chance of not being a disaster.
First, the yield has risen (the price has fallen). When I sold my last long-term bonds in March 2020, the yield on the 30-year Treasury was 0.99%. When I repurchased the bonds on October 13, 2026, the yield was 5.56%.
I paid $43.19 for the May 15, 2050 bonds with a coupon of 1.25%. These bonds have fallen in price from just over $100 to $43.19. The interest on these Treasuries is exempt from California state income tax, so the 5.56% yield is tax-advantaged.
Second, people have grown to understand the risks in Treasuries. I noted last month that the top four headlines in the Wall Street Journal all discussed problems in the bond market. When I was selling bonds in 2020, investors loved bonds. Now that bonds are hated, it is a better time to buy.
Third, I believe that deflation looms. While I still believe real interest rates will rise, I think it is possible that nominal rates will fall.
Have I picked the bottom in bonds and perfectly timed the purchase? Almost certainly not. However, now that bonds are hated and yield closer to 6% than to 0%, I have decided to buy some. I will consider buying more if we move toward deflation.
October 2026 portfolio performance
In October 2026, the Dow Jones Industrial Average gained 1.69%, while the Chicken Little Portfolio gained 2.10%. Year to date, Chicken Little has returned 3.24% vs. a gain of 8.77% for the Dow.
| Portfolio | Oct 2026 | YTD 2026 |
|---|---|---|
| Chicken Little | 2.10% | 3.24% |
| Dow Jones Industrials | 1.69% | 8.77% |
October 2026 was a very negative month for emerging market stocks, gold, and crypto. The Dow managed a positive month, while non-US stocks were flat. Treasury bonds recovered most of their year-to-date losses.
| Asset | Symbol | Oct 2026 | YTD 2026 |
|---|---|---|---|
| Dow Jones Industrials | DIA | 1.69% | 8.77% |
| Non-US Stocks | EFA | -0.49% | 9.35% |
| Emerging Market Stocks | EEM | -8.57% | 12.21% |
| US Long-Term Bonds | TLT | 5.44% | -2.77% |
| Gold | GLD | -6.58% | -10.23% |
| Bitcoin | BTC | -9.00% | -12.77% |
November 2026 portfolio position
The Chicken Little Portfolio is now 60% in cash and 40% in long-term US Treasuries. I continue to look for an opportunity to short stocks. I prefer to sell a bounce in stocks after the bear market begins (which it has not yet), rather than try to pick the top in stocks.
| Period | Chicken Little | Dow Jones Industrials |
|---|---|---|
| 2026 (through October) | 3.24% | 8.77% |
| 2025 | -0.03% | 14.56% |
| 2024 | 3.30% | 14.71% |
| 2023 | 2.05% | 15.80% |
| 2022 | -5.88% | -7.06% |
| 2021 | 5.11% | 20.69% |
| 2020 | 8.04% | 9.27% |
| 2019 | 9.03% | 24.82% |
| 2018 | 1.27% | -3.63% |
| 2017 | 4.57% | 27.72% |
| 2016 | -1.92% | 16.08% |
| 2015 (April through December) | -2.49% | -0.27% |
| Since inception (3/31/15) | 28.41% | 260.81% |
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