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Saturday, February 2, 8:45 AM The most exciting returns are to be had from an asset class where those who know it best love it least. What does it say when the first pick by Bill Gross at the Barron's Roundtable is gold? Gross isn't calling for an imminent bond bear market, but he doesn't see much upside either. For a fixed-income substitute, he recommends (what else) his BOND ETF, which trounced the competition in its first year and just added the use of derivatives to its toolbox. 21 Comments [Quick Ideas]
Friday, February 1, 3:34 PM Like Dan Fuss, UBS apparently believes the fixed-income rally has run its course. The company reportedly plans to inform many of its brokerage clients - most of whom believe they're sitting in conservatively structured bond portfolios - that they're being reclassified as "aggressive investors." This should make for some interesting conversations between wealth managers and clients. Comment! [Financials, U.S. Economy, Global & FX]
Wednesday, January 30, 3:08 PM Fixed-income is the most overbought in his 55-year career, says Dan Fuss, preparing to open a fund to U.K. investors (what a salesman). He's busy slashing duration along with exposure to emerging markets and junk bonds ("from a valuation point, ridiculous"). "For heaven's sakes, don't go out and borrow money to buy bonds right now." Comment!
Saturday, January 19, 12:30 PM "High-yield bond yields are lower than the S&P's earning yield for the first time ever," says a very bullish Oscar Schafer at the Barron's Roundtable (earlier). He says no one is talking about stocks at cocktail parties, but he does hear conversation about fixed income (that's some party). Pension funds hiding in bonds for "riskless returns" are in for a surprise. 7 Comments [Quick Ideas]
Tuesday, January 15, 4:36 PM Professional bear Albert Edwards generates headlines calling European stocks "unambiguously cheap." His more subtle message is the idea pension funds and such have swung the needle too far in favor of bonds over stocks, a move not yet fully played out, but that will leave equity fans with an incredible opportunity. 1 Comment [Global & FX]
Thursday, January 3, 10:29 AM "Costless" check-writing does have a cost, says Bill Gross, as it confuses business models and makes purchases of "paper" a preferred corporate choice over "investments in tangible productive (assets)." Government financing schemes - be it Bernanke's today, or John Law's 300 years ago - always end badly. Keep your bond durations short. 2 Comments [U.S. Economy]
Wednesday, January 2, 9:31 AM U.S. pension funds have just 38% exposure to equities vs. 60% only 7 years ago, notes former Templeton chief Mark Holowesko. Fixed income exposure is 41% vs. 28% 7 years ago. The S&P 500 risk premium (earnings yield less 10-year Treasury yield), he says, is at an extreme level of favoring stocks over bonds. More (I, II, III) on the rush into fixed income with yields at historical lows. 6 Comments
Thursday, December 27, 2012, 8:48 AM "(Fixed-income) investors need to adjust their expectations lower," says Loomis Sayles' Tom Fahey, as the math of bonds gets harder as rates go lower. Positive returns may lie ahead, but double digits or even high single digits are likely out for 2013. Among his favorite picks are emerging market companies issuing dollar or euro-denominated debt. Comment! [Global & FX, U.S. Economy]
Tuesday, December 18, 2012, 12:22 PM The BOJ has run out of options and currency debasement is all that's left, says Jeff Gundlach, explaining why long Japanese stocks is his most high-conviction idea at the moment. As for U.S. fixed income, he likes cash and short-term instruments. Investors in "yieldy" types of things like junk bonds may be about to get a wake-up call in 2013. 1 Comment [Global & FX]
Wednesday, December 12, 2012, 4:51 PM Risk premiums have been squeezed out of nearly every asset class, says Ray Dalio, making a short of bonds (presumably anything but Treasurys) maybe the best opportunity for returns. He's fuzzy on the timing though, other than the later in the year, the better. "He who lives by the crystal ball will eat shattered glass." 6 Comments [U.S. Economy, Quick Ideas]
Monday, December 10, 2012, 8:22 AM "Death of Equities?" Assets in fixed income hedge funds are set to overtake those in equity strategies for the first time in the history of the industry, according to HFR. The move jibes with other stories from 2012 about the abandoning of stocks for the "safety" of fixed income. 9 Comments
Thursday, December 6, 2012, 10:12 AM More from Loomis Sayles' Matt Egan (previous): The challenge for fixed-income investors is most are in funds benchmarked to the Aggregate Bond Index (AGG), which isn't a whole lot more than a glorified mix of Treasurys and MBS - in other words, as rates go, so will the index. The Fed, he says, forces you to look elsewhere. A wonderful interview - any fixed-income fan is throwing money away by not reading it. Comment! [Financials, U.S. Economy]
Tuesday, December 4, 2012, 3:28 PM "I'm going to own two thirds of fixed income (AGG). You better figure out something else to do," is the Fed's message to the markets, says BlackRock's Rick Rieder. Where's he finding value: Commercial mortgages (see Annaly's bid for CreXus), and non-agency MBS. (see also) Comment! [Financials, U.S. Economy]
Tuesday, December 4, 2012, 9:56 AM More from Schawel on yield ideas (previous): Another lightly treaded area are agency derivatives. The pool of buyers for products like IOs and Inverse IOs is small, and adjusted spreads remain attractive. Retail can get exposure through Pimco's Dynamic Income Fund (PDI) or Doubleline's Opportunistic Credit Fund. Comment! [Financials]
Monday, November 26, 2012, 3:18 PM GMO has "given up" on the bond market, says Ben Inker, co-head of asset allocation at the $104B money manager. Other than Japan (and barely there), he's not a fan of equities either, and 40% of his funds are currently "dry powder." That stocks look cheap is predicated on today's profit margins being sustainable, and "we don't think they're sustainable anywhere." The last time he held more cash was late 2007. 3 Comments [U.S. Economy, Global & FX]
Monday, November 26, 2012, 7:05 AM Fed involvement and investors' reflexive demand for safety are not just keeping a lid on Treasury yields, they've also brought volatility in the bond market to about the lowest on record. BAML's MOVE index recently fell to 53.70, nearing the 51.2 hit in May 2007. "Treasurys offer little real value, but in the short term, it is just hard to be a bear," says a fund manager, serving up a quote for a to-be-written book on the Bernanke-era bond market. Comment! [U.S. Economy]

SCHZ Schwab U.S. Aggregate Bond ETF

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Schwab U.S. Aggregate Bond ETF