Thursday, January 24, 2013

Yamada is calling for a generational shift in bonds

The tiny prognosticating titan, the sweet Louise Yamada, is calling for a generational shift in bonds. She says interest rates are bottoming -- thus prices are topping. This means interest rates are going up and bond holders will get punished.

However, she does not think any of this will happen overnight. As with anything dealing with bonds, changes are pretty glacial.

She advocates gradually shortening average bond duration. That's probably right. Anyone who's socking away money in 10-year Treasuries yielding 1.90 percent or so these days is asking for trouble.

And, yes, people have been lamenting about this for years. But when longer-term yields start dipping below the 3.0-3.5 percent rate of long-term inflation, and remaining there for an extended time, then double-bottoming, that's a strong hint that something different is happening.

The little lady is rarely wrong.

We shall see.


Source: Yahoo! Finance [with video]

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