With all due respect to Balaji (I love the guy), this sounds like total BS propaganda. We were at the end of a 40-year bond bull market. Bond rates were at an all-time low and had only one direction to go: up. Even I knew to buy short-term bonds. As for Powell, he did exactly what Volker did 40 years ago when faced with a similar inflationary situation: raise rates. Since then, Volker has been hailed as a genius. I’m sure Balaji knows all of this.

1) > It was like people did not believe them..

- Hadn't they just said that inflation was nonexistent?

- And then they said inflation was transitory?

- And they said vociferously that they *wouldn't* hike rates?[1]

- So, why would you suddenly believe them in early 2022?

Sure, it turned out that *that time* they weren't lying. But think about what you're saying. The Fed and Treasury are so unpredictable and/or insane that they will casually whiplash the multi-trillion dollar bond market.

Overall you are correct but small issue with Point 2., Technically hedging tails is possible although maybe not feasible. The futures markets provide such a mechanism. The problem is unlike Hold To Maturity accounting, the futures markets requires squaring the books with cash on a daily basis. By their nature, the tails are improbable and so hedging them makes those costs impractical compared to peers and the rest of your industry, and so infeasible.