On The Stock/Bond Conundrum | The Felder Report

On The Stock/Bond Conundrum | The Felder Report



Here is an outstanding article by Jesse Felder about how bonds and stocks interact.  As you probably know, bond yields have dropped dramatically.  This means that a lot of people are buying bonds instead of stocks, and the stock market is making new highs on low volume.  People are afraid of stocks.  Someday the last new high will be made and stocks will fall.



One of the advisers that Jesse quoted urged people to buy bonds when the yield is at 3% and sell bonds when the yield is at 2%.  That sounds like a good strategy to me.  TLT, the 20+ year treasury bond ETF, is soundly beating the whole stock market this year (VTI).  TMF, the 3x long bond ETF, has returned more than 20%.  I own TMF as my largest holding, and I'll probably hold it until the 10-year bond yield is around 2%.  Then, I'll repeat the cycle and buy again when the yield is at 3%.  I believe bonds will continue to beat stocks in 2014.