Courtesy of Pam Martens.
Christian Mueller-Glissmann, Equity Strategist for Goldman Sachs Speaking on CNBC
Last Friday, Christian Mueller-Glissmann, an equity strategist at Goldman Sachs, took to the airwaves at CNBC to discuss last week’s market selloff and entered a new phrase into the lexicon of investing. Mueller-Glissmann said: “The way this market has traded in this correction has been very much in line with our thesis from last year which was called the ‘Balanced Bear.’ You might remember this – this idea that equities and bonds can sell off together.”
In response to a question from his CNBC interviewer as to whether this means there is nowhere to “go and hide” in a market like this, Mueller-Glissmann responded: “Exactly. I think you’re dealing with a much higher portfolio risk, not only with equities being riskier but a much higher portfolio risk because there’s very little places to hide.”
If there’s nowhere to hide, we’d like to suggest that the new paradigm should be called the ‘Naked Bear’ rather than the ‘Balanced Bear.’
Historically, if the stock market is selling off sharply, money is moving into U.S. Treasury notes as a safe-haven play. That drives up the price of the notes which drives down their current yield. (The market expression for this is that yields move inversely to note and bond prices.) Likewise, if the stock market is rallying sharply, money should be moving out of Treasuries into stocks.
Now, obviously, retail investors are not making quick trades like this intraday in the stock and bond markets. We’re talking about hedge funds, institutional traders and the big trading desks on Wall Street that move at lightening speed from one asset class to another.
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