Macroeconomics and Cheese
For months and months (or maybe even a year) I’ve been banging on the table about how I expect that a decent portion of account returns for 2010 might just come from long-term (20+ years) government bonds.
I anticipate that US Treasury securities will continue to be our baseline method providing
the ability to persevere for the next who-knows-how-long.
and…
I would expect that between positioning in and out of Treasuries as appropriate and positioning in and out of equities as appropriate, our clients will continue to persevere… and quite possibly prosper.
You can read these quotes in context here. You can also review some of my other musings about the long US Treasury Bond “opportunity” here and here.
This is how we felt about long-term treasuries last year at Thanksgiving, from our post called, “Picking at Your Turkey”:
Following this premise, it wouldn’t hurt to accumulate some longer treasuries… like in the 20 year (give or take 5) range. I hear people whining about only getting 4.20% on a 20 year treasury… but I think if a person accepts what might be the ”new normal”… 4.20% might not look that bad, in hindsight.
We’re not married to holding on to the things for 20 years though. If we were presented with some outsized gains on our treasuries over the next year or two, we wouldn’t be afraid to take the profits and find a new home for the proceeds.
We are in line with mainstream thought in that we believe that bonds as an asset class (and specifically long-term government bonds) might be a good thing to have in your portfolio at most times. However, we depart from the mainstream because we do not statically allocate a portion of a clients’ portfolio to bonds and then hang on for hell or high water. Radically, we believe that there might be times when it is not a good time to make new purchases of the “long bond”.
And in a further logical departure from current financial dogma, we believe that there are even a few times where it’s in our best interest to actually sell them out of our accounts completely.
NOW WOULD BE ONE OF THOSE TIMES.
