taking a pretty good whack of late:http://finance.yahoo.com/q/bc?s=PIGIX+Basic+Chart&t=1yhttp://finance.yahoo.com/q/bc?s=VFICXAppears that the big switch out of bonds into equities may be underway.sw
1. Could be.2. It was only a month ago that bonds looked much better than the S&P. Not sure if this link adds the S&P.http://finance.yahoo.com/q/bc?t=1y&s=PIGIX&l=on&...3. Do you think we've hit our last European or US fiscal crisis?4. It IS a good time to shorten the corporate duration IMO.5. I've been wrong SO LONG about inflation I'm scared I'll never be right. Illogical I know, but five years is a LONG time to be wrong about inflation.6. Bill Gross of Pimco sounds the same warning. Unfortunately the conclusion should result in both a bond and stock decline.http://www.pimco.com/EN/Insights/Pages/Money-for-Nothin-Writ...Investment conclusionsInvestors should be alert to the longterm inflationary thrust of such check writing. While they are not likely to breathe fire in 2013, the inflationary dragons lurk in the “out” years towards which long-term bond yields are measured. You should avoid them and confine your maturities and bond durations to short/intermediate targets supported by Fed policies. In addition, be aware of PIMCO’s continued concerns about the increasing ineffectiveness of quantitative easing with regards to the real economy. Zero-bound interest rates, QE maneuvering, and “essentially costless” check writing destroy financial business models and stunt investment decisions which offer increasingly lower ROIs and ROEs. Purchases of “paper” shares as opposed to investments in tangible productive investment assets become the likely preferred corporate choice. Those purchases may be initially supportive of stock prices but ultimately constraining of true wealth creation and real economic growth. At some future point, risk assets – stocks, corporate and high yield bonds – must recognize the difference.VH is probably NOT the place for this discussion (said AFTER I entered in ;-)BobRYR Home Fool
taking a pretty good whack of late:http://finance.yahoo.com/q/bc?s=PIGIX+Basic+Chart&t=1yhttp://finance.yahoo.com/q/bc?s=VFICXAppears that the big switch out of bonds into equities may beunderway.Yahoo charts don't account for the year-end distributions, which makes the rather small actual drop appear much larger than reality:http://stockcharts.com/freecharts/perf.html?VFICX,PIGIXKen
Good point, but from what I see the decline is more pronounced this year (same time frame) than in past years.sw
and there is this from Goldman:http://finance.yahoo.com/news/why-goldman-thinks-dump-bonds-...sw
and there is this from Goldman:I don't think Fed is leaving the market, at least no yet. My expectation is Fed will not leave until the inflation is on your face or their stated goal of 6.5% unemployment rate is met.Ben B's second term runs upto 2014, so we are looking at, at least one more year of ZIRP and then also the interest rates will claimb gradually.While Goldman may be correct, but I would not rush into equities or sell any fixed income based on this.
"A reversion of risk premiums to historical averages of 6% nominal rates (3% real rates and 3% inflation) would suggest estimated losses in portfolios with bond durations of 5 years of 25% or more," equity strategist Robert D. Boroujerdi said in a note.Taking the other side, it depends on your time frame to make his statement be true. Lets take a retirement account where you don't expect to need that money right away. Stocks stayed flat for 10+ years on whole. They are still deemed over-valued by Shilling and others to the tune of 15% to 45%.IF you have a bond fund, or individual bonds of five year duration, you will be back to level at the higher rate he hypothesizes in five years.As I said, I personally prefer ST corporate funds with an average 3 year duration, but there still are arguments for keeping an allocation of bonds.BobRYR Home Fool
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