Something to think about.
If there are two interest raises this year, that's going to put the 10 year over 3%, for the first time in 7-8 years. That's something very worth thinking about. That's way over the dividend yield of the Dow Thirty. In other words, suddenly increased yields are going to drive bond prices down, almost certainly. When the yield goes up, the price of existing bonds goes down. If there are three, it's quite possible that we will see an uproar in pension funds, insurance companies, and general investment as that long sought after commodity, return on investment, shows its head again in bonds.
Jeffrey Gundlach, one of Barrons favorite panelists, says he thinks the great times from bonds have probably passed, as does Bill Gross. In other words, a lot of bonds that are going to be sold next year are going to command higher interest rates, which will lessen demand for existing bonds.
One of the things that has happened over the last eight years is the big squeeze. Every bit of money (return on investment) has been squeezed out. Bond interest rates have been super low. CD's pay diddle shit, saving accounts a half percent. That's changing. Suddenly Banks are offering 1-2% for deposits where they were offering .5 to 1%. Return has gotten really expensive, and when a new source opens up, it will be exploited. A lot of bonds will be sold next year, and the rates will be higher. That, in turn, means any existing bond fund you own is probably going to languish or go lower, depending on duration.
So what's a good investment? In short, everybody is in this together. Fifty years ago buying stocks was pretty much a guaranteed path to "riches", it's not quite that simple now.
Overall I don't think government bonds will have a good year. Maybe corporates and junk, but that's pushing it. If I were you I'd put most of your "bond allocation" into commodities instead.
I think this is pretty risky. Allocation into one extremely volatile sector is probably never a good idea. If you like risk, maybe 10%.
