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Bristlecone Monthly News Digest
Greetings!
"People don't go there anymore. It's too crowded." - Yogi Berra
The Big Switch
It is no secret that the stock market has suffered through a decade of miserable returns. Bombarded by constant reminders of this, investors are steadily losing their appetite for stock investing. Meanwhile, bonds have enjoyed a remarkable 30-year run of 8% - 10% annualized returns. Looking in the rear-view mirror, then, it shouldn't be a surprise to find that investors are steadily shifting their investment allocations from stocks to bonds. Following the crowd usually yields poor investment results.
The first two articles below highlight this shift. |
In Striking Shift, Small Investors Flee Stock Market
August 21, 2010 - New York Times
This article quantifies the switch, showing most notably the massive current inflows to bond mutual funds ($185 billion so far this year) and the re-allocation to bonds in 401k plans. >> Read the Article |
The Great American Bond Bubble
July 13, 2010 - Wall Street Journal
Bond yields are back near lows hit during the depths of the financial crisis; a 10-year US Treasury bond is yielding about 2.6% now. The authors raise the possibility that what seems like the safest investment today may offer future returns below inflation and, if rates rise, even negative total returns. Calling this a bubble, to our ears, is a little misleading. Bondholders are very unlikely to experience negative returns anywhere near those experienced in the aftermath of the tech stock and housing bubbles. Nevertheless, negative returns from this perceived safe-haven may come as a shock to investors. >> Read the Article |
Ten Ways to Improve Returns on Your Portfolios
The author reports on a speech by Paul Woolley (you can find the podcast on ITunes) listing ten ways for institutional investors to improve their investment returns. Although geared toward public pension funds, the advice is nearly equally applicable to individual investors. Mostly common sense, all investors need to be reminded occasionally to think long-term, keep turnover low, and keep investments transparent and simple. Let us know if you have questions about how we implement these tenets in your portfolio. >> Read the Article |
The New Abnormal July 2010 - Bloomberg Business Week
"The New Normal" was a phrase coined by market gurus at PIMCO that has become a catch phrase of the current market environment, shorthand for our current economic struggles: lower economic growth caused by de-leveraging, re-regulation, and de-globalization. This article from Businessweek looks at the trees rather than the forest, and finds some interesting, if schizophrenic, consumer behavior he calls "The New Abnormal.">> Read the Article
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