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Bill Ackman Pulls the Plug on Treasury Shorts, Citing a World Awash in Risk

In a plot twist that underscores the complexities of the investment landscape, billionaire investor Bill Ackman recently hit the brakes on his short position against US Treasury bonds, a move that spotlights his risk radar amid global uncertainties.

Ackman, known for his strategic acumen, revealed in a recent post on X that he’s stepping away from his profitable gamble against the bonds. Why? It’s straightforward: the world’s risk meter is just too high. “The current economic deceleration is more rapid than data indicates, making shorting bonds at these long-term rates too risky a play,” he explained.

This retreat is particularly noteworthy given that Ackman had been vocally bearish on 30-year Treasury bonds only a few months ago. Back in August, he cast a wager against these bonds, hedging against an economic narrative he foresaw being dominated by a consistent 3% inflation rate.

And for a while, it seemed like Ackman had hit the jackpot. Interest rates took off — the 10-year US Treasury yield soared from 4.08% to a staggering 5.02%, while its 30-year counterpart leaped from 4.17% to 5.18%. But here’s the catch in the bond market: when yields climb, bond prices do the tango in the opposite direction. Result? The iShares 20+ Year Treasury Bond ETF nosedived by 15%, painting a picture of the profitable descent that Ackman’s strategy captured. For the even longer-duration 30-year bonds, the plummet was even more pronounced due to their heightened sensitivity to rate shifts.

However, Ackman’s strategic backpedaling doesn’t exist in a vacuum. The world stage is rife with tensions and uncertainties that no investor can afford to ignore. From the conflict flaring up between Israel and Hamas, potentially setting the stage for wider Middle Eastern unrest, to the palpable tension in the US with ongoing labor strikes across major automakers and political disarray threatening a government shutdown, the global tableau is anything but serene.

These smoldering hotspots on the global risk map aren’t just causing sleepless nights for investors; they’re also potential catalysts for a “safety trade” rush. This could trigger a domino effect: a mass migration into US Treasury bonds, sending bond prices skyward and yields tumbling down. It’s a scenario Ackman chose not to stick around for, preferring to pocket his profits and sidestep the “what ifs.”

And Ackman’s not alone in eyeing the storm clouds gathering on the horizon. JPMorgan’s Jamie Dimon recently shared a similar sentiment, dubbing the current global climate as potentially “the most perilous we’ve encountered in decades.”

Ackman’s latest move serves as a stark reminder for investors and market watchers: in a world where calm can turn into a storm on a dime, agility, insight, and the willingness to pivot are as valuable as any asset in your portfolio.