Blowing a Bigger Bond Bubble

I have one simple question for those stuffing their cash into bonds: What happens when the Fed grows a pair and pulls the trigger on a rate hike? Surely you don't actually believe that extended period crap can last indefinitely.

The Investment Company Institute says since early 2008 markets have seen $601 billion of cash inflows into bonds and outflows of $240 billion for stock funds. The flee to safety is totally understandable but at some point it becomes excessive, dangerous and, let's be real, a bit sick.

Said Bloomberg:

Retail investors in the U.S., burned by two market crashes in a decade, have shunned stocks for the longest stretch in more than 23 years, upsetting the balance of power in the $10.5 trillion mutual-fund industry.

Bond funds attracted more money than their equity counterparts in 30 straight months through June, according to the Investment Company Institute, a Washington-based trade group. Preliminary data show the trend continued in July, matching the streak posted by bonds from 1984 through 1987.

Oh poor poor capital markets, we miss you.

We've seen this before and that one didn't end nicely either.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.


W.C. Varones said...

I discovered this weekend that I had some Pimco bond and TIPS funds in an old 401k. I'm blowing them out today.
Also just bought some TBF. Like the TBT without the leverage problem.