Tuesday, May 29, 2012

Bond Market: Buy or Bubble

Bond Market: Buy or Bubble

I was on Fox Business News on Friday to debate whether or not the bond market is a buy or in a bubble.  At the end of the day it all depends on your time frame.  Short term, bonds are in an uptrend so if you are a tactical money manager, which we are, you want to invest with the trend.  However, when/if Europe gets its act together and the Fed stops manipulating rates that trend could change in a big way.  I do believe that eventually shorting longer term treasury bonds will be the trade of the decade. 

If you are a long term, buy and hold, investor (which you shouldn't be) then I wouldn't touch bonds with a 10 foot pole, too much risk for so little return.  If you want safety go to cash.  Buying long term treasuries at this point is like trying to pick up pennies in front of a steamroller.

Wednesday, May 16, 2012

Advisors Eye Alternatives, Question Buy-and-Hold Approach


There was just an article in Financialplanning.com talking about the 2012 Natixis Global Asset Management U.S. Advisor survey.  Here are the highlights:

  • 49% of advisors are uncertain that the traditional 60/40 allocation between stocks and bonds is still relevant
  • 23% said the traditional approach isn’t close to meeting the needs of investors in contemporary markets
  • 38% of advisors that have been in business for more than 15 years no longer believe that the traditional 60/40 allocation is the best way to pursue returns and manage risk
  • Advisors were twice as likely to say that new approaches are needed compared to those who favor the status quo (46% vs. 22%).
What I have to say about this is simple---to the advisors questioning traditional strategies---what took you guys so long?  To the others---good luck with that.

Monday, May 14, 2012

A Rare Speed Bump in Commodities' Long Run


Saw this in the WSJ this morning.  I do not argue that commodities are in a downtrend right now, what we need to be careful of is how we define a trend.  The article talks about the uptrend that commodities have been in since 1999, which they have been, but a lot has happened between the lines.  Fortunes could have been made or lost based on what happened and how you were positioned during this 10yr+ uptrend.  We used to be able to define trends in terms of decades but these days, with increased volatility, we need to define them in terms of weeks and days. 

Monday, May 7, 2012

How To Play the Bond Market Now


Above is the link to an article in the WSJ this morning about how to play the bond market now that interest rates are at extreme lows.  With rates this low we know two things---1. At some point they will go up, 2. You can't earn much interest in bonds at these rates. 

The article presents a number of the old standby ideas---diversification, higher yielding bonds, and emerging market bonds.  The real answer of course is to take a tactical approach to bonds.  Be in the sectors of the bond market that are in an uptrend and be out of the ones in a downtrend.