JR Snell Capital Management, LLC

A couple of words about bonds here… and a little bit of a warning as the media-hype machine touts the past success of bonds.

(Hint: Although the monkey thought it was all in good sport, we all know what happened to the weasel next.)

My long-running pseudo-battle with Bill Gross and the Bond Sellers came to an end this fall when we exited our long-term Treasury positions. I still do not like long-term bonds as an investment vehicle right now. The simple reason is that the price is too high.

The price of the long bond (20+ year Treasury) ETF (TLT) is being held up at weirdly astronomical levels by investors who can’t think of any safer place to put their money. The troubles in Europe have driven investors around the globe out of the Euro and European country’s sovereign debt and into the dollar and US debt.

Remember this: People are not buying US debt because it’s “all that”… it’s not, and it’s providing a lousy rate of return… but, hey… we can print our own money and the Europeans can’t, so Treasuries seem to make a pretty decent “mattress” for global investors to stuff their cash into at the moment.

I have my ears to the track and I’m hearing that money has been coming out of stock mutual funds at another record pace here recently. And where is that money going?

U.S. stock mutual funds that invest in domestic equities had their second-biggest redemptions last year as record market swings sent investors to the perceived safety of bond funds.

And why do we suppose it’s going in to bond funds?

Despite a reputation for being a slow-growing alternative to stocks for the risk-averse, bonds just passed stocks’ long-term performance over the past 30 years.

Many investors chase last year’s winners, perennially dooming them to under-performance… not to mention it makes you feel like you’re always in the wrong place at the wrong time… very hard on the ego. It’s kind of like charging into real estate in 2006: It seemed like a good idea at the time.

In fact, you are actually witnessing an historical event: A bond bubble that offers the most expensive bond market in your lifetime. Don’t bite… The minute Europe straightens out their situation, the bond market bubble will pop.

Here is a very wise investment technique (good for all fields at all times): Take the time to figure out precisely what everybody else is doing… and then do the opposite.

ACTION ITEM: If you have bond investments, reduce or eliminate your allocation to them.

Bill Gross, Bond fund, Bond market, Exchange-traded fund, interest rates, investing strategies, Investor, Mutual fund, treasuries, treasury, United States, United States public debt, United States Treasury security, William H. Gross

By Hibah Yousuf August 30, 2011: 1:08 PM ET

NEW YORK (CNNMoney) — Investors have been pouring their money into U.S. Treasuries all year, much to the consternation of bond guru Bill Gross, who had been advocating for investors to dump out of government debt because of their low yields.

Gross, who manages the world’s biggest bond fund, is now admitting that he struck out.

Read the rest of the article at cnn.com here.

Economy of the United States, Federal Reserve System, Financial Times, Pimco, United States, United States Department of the Treasury, United States Treasury security, William H. Gross

We’ve had a rough couple of weeks in the stock market and it’s hard to believe how long it’s been that we’ve seen no net progress in the averages. I was thinking earlier of some way to communicate just how long the S&P 500 Index has visited and revisited the value that it closed at today.

I’ve noticed that most people remember where they were when significant events in their lives occurred. Certain songs, events, or images can also take one back to the past or to a specific place or time long ago. I don’t know how it works, but it does and I thought it might be interesting to note some of the events of the last 13 years that happened in a month that the S&P Index also traded at 1120. The month and year, followed by the close of the index for that month is in parenthesis.

• Disney’s Animal Kingdom opens at Walt Disney World near Orlando, Florida, United States. (April 1998, 1111.77)
• A federal judge in Sacramento, California, gives “Unabomber” Theodore Kaczynski four life sentences plus 30 years after Kaczynski accepts a plea agreement sparing him from the death penalty. (May 1998, 1090.82)
•  Terry Nichols is sentenced to life in prison for his role in the Oklahoma City bombing. (June 1998, 1133.84)
• Russia buries tsar Nicholas II & family, 80 years after they died. (July 1998, 1120.67)
• Monica Lewinsky scandal: US President Bill Clinton admits in taped testimony that he had an “improper physical relationship” with White House intern Monica Lewinsky. On the same day he admits before the nation that he “misled people” about his relationship. (August 1998, 957.28)
• Brokerage houses are ordered to pay 1.03 billion USD to cheated NASDAQ investors to compensate for their price-fixing. This is the largest civil settlement in United States history. (November 1998, 1163.63)
• The Russian Mir space station is disposed of, breaking up in the atmosphere before falling into the southern Pacific Ocean near Fiji. (March 2001, 1160.33)
• Former president of Federal Republic of Yugoslavia Slobodan Milošević surrenders to police special forces, to be tried on charges of war crimes. (April 2001, 1249.46)
• Terrorists hijack two passenger planes crashing them into New York’s World Trade Towers causing the collapse of both & death of 2,752 people. (September 2001, 1040.94)
• 2001 Attack on Afghanistan: Taliban forces abandon Kabul, Afghanistan, ahead of advancing Afghan Northern Alliance troops. (November 2001, 1139.45)
• Euro banknotes and coins become legal tender in twelve of the European Union’s member states. (January 2002, 1130.20)
• Tiger Woods becomes the third golfer to win The Masters in two consecutive years. (April 2002, 1076.92)
• In Fallujah, Iraq, 4 American private military contractors working for Blackwater USA, are killed and their bodies mutilated after being ambushed. (March 2004, 1126.21)
• U.S. media release graphic photos of American soldiers abusing and sexually humiliating Iraqi prisoners at Abu Ghraib prison. (April 2004, 1107.30)
• Ronald Reagan’s funeral is held at Washington National Cathedral. (June 2004, 1140.84)
• Following the bankruptcies of Lehman Brothers and Washington Mutual, The Dow Jones Industrial Average falls 777.68 points, the largest single-day point loss in its history. (September 2008, 1166.36)
• Tiger Woods announced an indefinite leave from professional golf to focus on his marriage. (December 2009, 1115.10)
• The 54 year run of the soap opera As the World Turns ends as its final episode is broadcast. (September 2010, 1141.20)
• Today (August 2011, 1119.46 (so far))

Dow Jones Industrial Average, Ted Kaczynski, Theodore Kaczynski, Tiger Woods, United States, Warfare and Conflict, Washington National Cathedral, WGC-Bridgestone Invitational