We hold a position in a laddered bond fund, LALDX. Laddering permits the investor to hold long term bonds until they expire, thereby providing some protection against increases in interest rates. The average duration of the fund is short enough to make it reasonably likely that we will be successful, though of course if we have to sell the entire fund when interest rates are elevated, we will suffer some loss.
The other holding of a related nature is a position in the Merk Hard Currency Fund MERKX. This is protection against further devaluation of the dollar and it holds 10% in gold as well as investments in currencies they consider strong.
Please understand that I am not recommending either position to readers whose situations are not known to me. I am just answering the question. This information is also available on my website, www.marketmonograph.com
Recommended strategy
AskAsa
5/10/2011 8:55:15 AM
Fred, What advice are you giving your clients about this now, given the uncertainties in the market?
risk vs reward
tokyogai
5/9/2011 8:36:54 AM
I think this all points out that we are out of kilter on risk vs reward on bonds. There is not premium for going longer term. I would think this can not last.
long term bond vs. short term stock
Value Hiker
5/7/2011 12:26:02 AM
It is said that investing in long term bond is as risky as investing in short term stock. Bond is where we park our short term money, we prefer to invest in bond for short term, then why shall we care about the long term trend of bond?
Re: Re : No Consensus on Where Bonds Will Go
Fred Goodman
5/6/2011 3:00:50 PM
Bill Gross has a very good reputation, but we see what happened when QE1 ended and the result was different from what Gross is expecting. It's sort of like the defense of the husband caught redhanded with his secretary, "Who are you going to believe, me or your own eyes?"
Re : No Consensus on Where Bonds Will Go
yalanand
5/6/2011 2:50:45 PM
Fred,
Thanks for the detailed analysis. So overall its a good idea to "wait and watch" till we get clear idea of where bonds and the dollar are heading.
Fred,
Great charts! It's interesting to me that the bond market has been strengthening recently. The bond market curiously turned around 1) before the Fed downgraded their economic outlook and 2) some of the economic indicators (ISM, jobless claims) softened up a bit. It seems that the bond market has been forecasting a weakening economy.
I am in the camp that bonds may continue to rally on the end of QE2, just because that's what they did in the spring of 2010 when QE1 ended. The end of the program means the economy will have to stand on its own feet, and a lot of people seem pretty nervous about that.
In the big picture, the economy still appears to be battling the massive bank delveraging, which is still going on. That explains whey despite huge money-supply growth, lending is still anemic.
--Scott
Not exactly good news not knowing where bonds or the dollar will go. but there really is nothing that can be done about it right now. It seems like the only thing anyone can do is wait and see...
The blogs and comments posted on Investor Uprising do not reflect the views of Investor Uprising, PRNewswire, or its sponsors. Investor Uprising, PRNewswire, and its sponsors do not assume responsibility for any comments, claims, or opinions made by authors and bloggers. They are no substitute for your own research and should not be relied upon for trading or any other purpose.
Tweet This