Are you like so many Americans and shifting your money into fixed income/bond assets?If so, you must read three things:
1. Here’s Josh Brown on the insane volume of inflows into bond funds these days, and the inevitable massacre that will someday hit when the bond bear market commences.
There’s going to be such a brutal bond investor slaughter at some point over the next decade that the streets of Boston’s mutual fund district will run red with blood, the skies will be shot through with the lightning and thunder of unexpected capital losses and those who manage to survive will envy the dead.
Given the state of global debt markets and the apparent lack of value across the investment landscape, it’s easy to see why interest has turned to emerging economies.
Gabriel Sterne, an economist at the frontier-market brokerage firm Exotix, told Business Insider, “You get some of these big funds – a lot of the funds in the States – just getting these inflows every month. What do they do with them? They tend to just double up and put them in [emerging markets].”
3. And finally, Goldman’s Jim O’Neill on the impact of a President Romney:
As I touched on in previous weeks, some of our senior fixed income managers believe that a Romney victory could be very important for the bond market. The main reason is he has made it clear that he would nominate a new Fed Chairman who does not share the current leadership’s passion for unconventional monetary accommodation. One has to hope that the economy will be sufficiently robust, despite the fiscal issues, for the Fed to shift its position. A combination of large fiscal tightening and pressure on the Fed to reduce its monetary friendliness doesn’t seem like a great combination for equity markets. Of course, the lack of fiscal tightening and no agreement for future fiscal tightening doesn’t seem like a brilliant recipe either. I hope it’s just my jet lag but I find myself pondering the following: usually countries will not deal with tough fiscal challenges unless markets force them. With a bit of luck, a holiday will clear my mind and mood on this topic.