Subscribe in a readerDoug Kass 8/4/10 ~~
I tip in favor of shorting bonds over being long stocks. I believe that my downside in a bond short is limited and, if stocks rally, the reasons behind that rally (economic clarity) could produce a larger drop in fixed-income than a gain in equities.
How expensive are bonds? Consider, that at a 2.89% yield on the U.S. 10-year note fixed-income is priced at a P/E multiple of 34.5x (the inverse of 2.89%) against the S&P's P/E multiple of only 12.0x.
Regardless of one's views, erring on the side of conservatism seems to be the preferable course of action, especially after the sharp rise in the U.S. stock market.
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