If I were invested in bonds, either through mutual funds or individual instruments, I would begin thinking about moving those investments into high quality equities, (eg stocks in companies that are stable, are well managed, are diversified with international operations, and have historically increased earning and dividends.
I'm a little afraid of the bond market right now; because, the Federal Reserve has been manipulating interest rate through its monetary policy by constantly lower interest rate to stimulate the economy. This has been going on since before the real estate bubble burst, (eg way Back to President Bush). As interest rate are lowered, the new bonds being offered come with lower returns, (eg interest rates), which results in the older, higher yielding bonds appreciating. A lot of people have really done well in the bond market during this period of the Feds constantly lowering interest rate, and investing in bonds was practically a sure bet to be a winner. The Federal Reserve has now used up all its tool in its normal monetary policy toolbox by lowering interest rates all the way down to zero. Although this is not normal monetary policy, the Federal Reserve has now guaranteed to buy 600 billion dollars of USA government bonds, traditionally the safest investment in the world. This means the government does not need to offer any rate at all to attract capital. It also means other companies that issue bond only need pay very little return on their debt to attract buyers to their bonds, (eg if the USA government bonds are being offered at zero return, then other companies could offer rates of return on their bonds as low as 1/2 of 1 percent, or 1 percent and still attract investors. There is no real competition in the debt markets, right now, that would force entities offering bonds to pay realist rates of return to find buyers. The Feds hope to encourage banks to borrow its funds at very low rates, so they bank can in tern offer loans to their customers at low rates. If the bank's customers borrow money as the economy starts to grow, it would mean more investment by the borrowers in land, buildings, plant, equipment, and employees needed to increase production of good and services. Hopefully, this would start the USA economy rolling again. Once the economy begins to strengthen, the Feds will likely begin to raise interest rate to banks. Also, USA government bonds and corporate bonds would need to pay ever increasing returns in order for debt instruments to attract needed capital, etc. As the new bond begin paying ever increasing interest rates, the old low interest bond that will not mature for 10, 20 or even 30 years will depreciate in value, and if the interest rates increases to fast, we could have another financial crisis due to a collapse in the bond market. Regards, LelandJ On 11/15/2010 11:16 AM, Nicholas Geti wrote: > Stocks are already back. Just not all of them. The stock market as a whole > is irrelevant. You must pick individual ones to succeed. Also the time frame > for a pick is not very long. At most 6 months traders run them up then > abandon them and move to the next one. Then drive that one up, and so on it > goes. Multinationals that pay dividends are the main stocks doing well > because many countries are recovering nicely from the world-wide depression. > E.g. Caterpillar has moved extremely well plus pays a nice dividend but the > big gains for the year are over. I have picked up $20 per share since I > bought it 6 months ago so I don't expect any more big gains for awhile. > > If I could predict stocks I would be a millionaire by now. I get lucky at > rare times then I just tread water until I find another stock. > > I don't believe in funds, especially front loaded ones. Most fund managers > are pussies. They just want to collect their commissions and don't care > about you. They cannot buy small cap stocks (which is where most of the big > money is made) by law and go with the herd buying large caps only when > everyone else has already got in and then sell too late. It is like musical > chairs; the last one standing holds the bag. > > If you think that a stock fund is going to help out your financial status, > forget it. Funds are just a place to park any surplus until the money is > needed in the future. You will be lucky to get even 1 or 2 percent yield. > There are some safer funds such as those by Fidelity but again timing is > important. If you look just two years back, they have done quite well > because the stock market as a whole has come back significantly since 2008. > But over a 5 year period they are just getting back to even. > > There is a ton of information on fund performance on the Internet. It takes > a lot of work to find it. > > Conclusion: it is playing with fire for a politician (or his appointed > manager) to be working the stock market. To make money requires taking risks > which if they go bad the politician can be accused of fraud. All you have to > do is look at Bernie Madoff for what happens if your manager is a crook. > > > ----- Original Message ----- > From: "Pete Theisen"<[email protected]> > To: "ProFox Email List"<[email protected]> > Sent: Monday, November 15, 2010 10:34 AM > Subject: [OT] For Stock Experts > > >> Hi Everybody, >> >> I am a candidate for our local City Commission. The City Manager briefed >> me on a plan to hose the police retirees on their healthcare and >> pensions, claiming that the city lost so much in the stock fund that >> supported the plan that they "have to". >> >> But - the replacement plan has a front load that will make it *more* >> expensive for the first couple of years. Also, if the stock market >> rebounds the original plan would be better? >> >> What are the chances of stocks coming back? >> -- >> Regards, >> >> Pete >> http://pete-theisen.com/ >> http://elect-pete-theisen.com/ >> [excessive quoting removed by server] _______________________________________________ Post Messages to: [email protected] Subscription Maintenance: http://leafe.com/mailman/listinfo/profox OT-free version of this list: http://leafe.com/mailman/listinfo/profoxtech Searchable Archive: http://leafe.com/archives/search/profox This message: http://leafe.com/archives/byMID/profox/[email protected] ** All postings, unless explicitly stated otherwise, are the opinions of the author, and do not constitute legal or medical advice. This statement is added to the messages for those lawyers who are too stupid to see the obvious.
