Don't Overreact to the Bond Move

 | Nov 20, 2013 | 6:40 PM EST
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So how does 2.8% on the 10-year Treasury feel this time around? Is it as dangerous as the last time? Do we have to sell everything and take a 4%-7% hit because we are back to where nothing bad happened last time?

That's what I think people reacted to all day, as, once again, people blew out bonds, thinking that there will soon be no bid underneath, and others shorted them, betting that the Fed will soon be done with its purchases. We saw this movie before, and it ended really badly for the shorts.

I totally understand that the stocks that yield 3% with little growth that are up huge should be sold on this. That happened last time. Probably happens again.

But in the end, as long as the Fed is still there, the yields aren't going to be on a tear higher, as there's just not enough demand in the real market.

It can't be same-old, same-old, because many of the bond market equivalent stocks are up huge from the last tapering scare, even as the fundamentals haven't necessarily improved.

Still, though, I can't tell you to blow them out, because the next piece of weak data trumps the Fed minutes, and we go back again.

If you want to protect yourself, do the usual: Buy puts on the iShares U.S. Real Estate (IYR) and the SPDR S&P Homebuilders ETF (XHB) and sell the usual consumer packaged-goods companies that aren't doing all that well. Buy some puts on them. It can't hurt, especially if rates overshoot.

Just don't expect the whole market to roll over. I think it is too late in a very up year for that to happen. 

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