Pigs vs. SPY & Yields Out of Whack

Why has this market been so challenging for me? Well, for one thing a logical connection between the KBE/SPY ratio and yields broke recently as long-term yields rammed upward and this ratio rammed downward in November. Now yields are dropping and KBE/SPY (along with nominal KBE) is positive for the 3rd straight day as yields decline. Wacky.

kbe/spy ratio

How the hell is that supposed to be managed on a daily basis? Answer: it isn’t. I got rid of KRE on this bounce and now if I am going to play rising yields I am going to do it by being long yields and/or short bonds. Too many moving parts in what I thought was a well balanced portfolio. That is what this last couple of weeks has shown me.

Here is a closer view of the ratio.

kbe/spy ratio

And here is the 10yr yield, which should look like it and had looked like it until November rolled around.

tnx

Moral of the story? The macro/chart nerd got played by the market. It’s annoying, but it is what it is and I need to try to understand it better.

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