May 06, 2013
Fund manager: Now’s the time to buy bonds.
With Treasury yields near record lows, one
contrarian fund manager says now is the time to buy. While investors
around the world are voraciously hunting for higher returns than the
1.7% currently offered by 10-year Treasury notes, that’s a misguided
approach, said Jeffrey Gundlach, founder of investment fund Doubline
Capital. He acknowledged that “bond yields are painfully low,” but said
there are plenty of reasons for those yields to move even lower.
Speaking at the Altegris Global Conference last week, Gundlach said he’s
convinced the Fed won’t raise rates or end its bond buying program,
known as quantitative easing or QE, anytime soon. (Federal Reserve
sticks with stimulus) By buying bonds, the Fed’s stimulus moves push up
U.S. Treasury prices, which in turn depresses yields. Bernanke has said
that he sees no negative consequences from the Fed’s actions, so
worrying about the end of it is a waste of time, Gundlach said. “Let’s
face it, QE travels right through the central heart of the U.S. bond
market,” Gundlach said. Last week, the Fed said it would continue buying
$85 billion a month in mortgage-backed securities and Treasuries.
Buying up Treasuries probably won’t make
investors rich, Gundlach admitted, but in a world fraught with
investment risk, it’s still a relatively safe place to find steady
returns over the long-term. Even if investors opt to just keep their
cash in banks right now, there are no guarantees they’ll remain safe.
Just look at Cyprus, he said. Beyond Treasuries, Gundlach thinks
corporate bonds could be interesting too, but investors should avoid
bond index funds. He reminded investors that General Motors and Ford
made up a large portion of investment grade index bond funds ahead of
the financial crisis. Investors in those funds who thought they were
taking on minimal risk experienced steep losses in 2008 and 2009. How
low could bond yields go considering 10-year Treasury yields are already
hovering below 2%? “I’m starting to think that all bond yields will
converge down to 1%, if central banks truly are going to do whatever it
takes,” Gundlach said. If Gundlach is right, and yields move even lower,
investors who buy now, could still net a nice profit.
Survey: 87% of Americans ‘Not Confident’ About Their Retirement.
Despite the Dow recently hitting all-time
highs, millions of Americans still have a dismal outlook when it comes
to their own ability to retire, a new survey reveals. Conducted by the
Employment Benefit Research Institute, the survey reveals a startling
fact: A mere 13% of workers are “very confident” when it comes to having
enough money to retire. More than twice that number, 28% of
respondents, said that they were “not at all confident” about their
ability to retire comfortably (triple the number from three years ago).
More than a fifth of respondents — 21% — said they were “not too
confident” and 38% said they were “somewhat confident.” So why, in the
great prosperous country of America, are 87% of those facing retirement
lacking confidence? Many who took the survey pointed to a rising cost of
living and day-to-day expenses as the reason they are worried about or
unable to save enough for retirement. And many also noted that rising
healthcare and long-term care costs will have a major impact on their
ability to afford a comfortable retirement. Adding insult to injury is
the fact that the once mighty dollar no longer goes as far as it once
did as a result of the loose monetary policies from the Federal Reserve.
And current yields on safe investments, like CDs, bonds, and money
markets, pay 85% less than what they did just six years ago. The impact
of President Obama’s tax increases isn’t helping matters either.
Read More
http://sweetfutures.com/2013/market-update-from-mike-kuta-the-squawk-trader-7/
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