06 Feb Market Note: Bubbles, Bonds, and Diversification
- On February 5th, two bubbles burst. The first was the tulip bubble, and the second was the bubble in complacency (low volatility).
- The real carnage was focused in funds that sell ‘volatility’, with one fund losing over 80% yesterday.
- We also briefly discuss the ramp in Treasury supply that is going to be concentrated in just two months—February and March.
- This increased supply will place pressure on interest rates (lower prices) and will serve to reduce liquidity in the market which, in turn, can negatively affect riskier assets.
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