Back in February, David Henry and I wrote the cover story “It’s a Low, Low, Low-Rate World: Why money may stay cheap longer than you think”. On the day that the story came out, the rate on the 10-year bond was 4.73.
When rates spiked up to nearly 5.3 in June, skeptics were quick to trot out the “magazine cover curse.” Randall Forsyth in Barron’s wrote that “Suddenly, it’s not such a low rate world” and referred to the BW cover.
Barry Ritholtz jumped in with “Long Live the Magazine Cover Indicator!”And Spencer Jakab of the Dow Jones News Wire wrote a column which said that “Financial journalists may be the ultimate contrarian indicator,” and pointed to the low-rate cover.
Well, all these people may eventually be right—but a month later, it’s still a low-rate world. In fact, rates have slid significantly since then. The 10-year rate hit a recent peak of 5.29 on June 12, just when they were making their comments. As of 4PM today, the 10-year rate stands at 5.02. That’s 27 basis points below its June high, and just 29 basis points above its level at the time of the cover story.
So if you had bet on rates to fall when Forsyth, Ritholtz, Jakab and others were making fun of the low-rate cover, you would have made money, at least in the short run.
Call it the magazine cover-curse counter-curse…if a financial journalist writes that a magazine cover is wrong, then the market gods punish him or her for excess certainty.
Of course, the logical extension is that by writing this post, I’m exposing myself to the cover-curse counter-counter-curse…so that by next week 10-year rates will soar 50 basis points.
But I’m prepared…I’ve invoked the power of the Market Bunny of Doom, which a friend gave me as a present.
Now I’m all set….