The Overleveraged Cone of Shame

The following chart shows the natural log of the 1-year treasury yield. By using a natural log, constant exponential growth (or more importantly in this case, exponential decay) can be seen as a straight line.


Click to enlarge.

We're repeatedly told to brace for the rising interest rate environment. It's a sure thing! Coming any decade to a country near you! I assume that the advice is intended for the long-term, and not just some short-term unsustainable cyclical bounce. I therefore offer a two-step program to get us there.

Steps Needed

1. Get back in the cone!

2. Escape from the cone (to the upside)!

File:Kelpie wearing an Elizabethan collar.jpg (aussiegall from sydney, Australia)

How hard can it be? Do not concern yourself that we aren't making any progress towards completing the first step. The second step is bound to be easier. Once the cone goes on, how hard can it be to get the cone off and run free? There I go, thinking as a dog again. Always the optimist!

The future's so bright I gotta get coned! Yes! Genius!

As a side note, you'll be happy to know that the dog in the photo made a full recovery. I just wish the same could be said for our economy.

Once again, this is not investment advice. I'm simply suggesting that some sure things are not quite as sure as many seem to believe (whether it be getting in cones or escaping from them). But what's new?

Source Data:
St. Louis Fed: Custom Chart