At the heart of what I am trying to do is capture a shift away from the current economic and political system, that is a system that favours capital over labour. There are a lot of reasons for this, but the key trade at the heart of this view is a long gold/short treasury trade. Over the long term, we are still early to this trade, but in February, we saw a reversal to GLD/TLT, particularly at the end of the month.
The cause of this is not hard to find. Investors are seeing weakening US economic data, and are starting to price in interest rates cuts in the US. The 2 year treasury yield had a steep fall at the end of February. We also saw the cost of corporate debt fall, which is beneficial for US stocks, and hurts my short book.
It is very easy for me to see how investors can say that nothing has changed, and we are going back to the perfect days when the Federal Reserve cuts interest rates to protect markets, and US markets continue to soar. But for me February said to me the exact opposite - that the US led economic system is coming to an end.
