Buy bonds. A friend made this call early this year. He believed that the economy was weak and interest rates would, as a result, fall. Which they did. Here’s TLT this year:
I’m as surprised as anyone by this huge move. But I’m not surprised by interest rates not moving up, as everyone and their uncle (except me) have predicted.
Personally I believe we’re years away from interest rates rising to any meaningful level. Which is the reason I own a swag of NLY, which I’ve recommended all this year.
I prefer NLY to TLT because NLY carries a nice dividend yield — even now, after the rise, still over 11%. TLT can prove very volatile. Here’s it over the past five years:
And now we get news this morning. From the Wall Street Journal this morning:
The U.S. economy contracted in the first quarter of 2014, the latest stumble for a recovery that has struggled to find its footing since the recession ended almost five years ago.
Gross domestic product, the broadest measure of goods and services produced across the economy, contracted at a seasonally adjusted annual rate of 1.0% in the first three months of the year, the Commerce Department said Thursday. It was the first time economic output contracted since the first quarter of 2011, when it declined at a 1.3% pace.
My friend says this latest bond rally is very hard to figure. This first quarter report was weak. We’ve known that for a while. (Remember the weather.) But since then economic statistics have been strong (excluding exports) — certainly housing. This bond rally has confused bond traders. And many of them are invested in equities, not bonds.
Why? Says my friend, “The Fed and the world’s bankers are forcing us into equities with their zero interest rates. Cash is not king. It’s drek. People are sitting on mountains of it. They are being forced into equities, which is why equities should continue to do well for the rest of this year.”
Says my most prescient friend, “Even if they started raising rates today, they wouldn’t get to 1% for at least a year. We are in The New Normal right now. Low interest rates. Shortage of investment opportunities. Get used to it.”
By the way, says my friend, “Have you been watching CNBC for the past six months? They kept telling their viewers that the bond cycle was over. They were wrong. Wrong. Wrong.”
The dumbest way not to invest: Use your own personal experience with the company. Peter Lynch said “like the product, like the company.” Yet all the companies I hate dealing with have done so well recently:
+ To wit. Try getting a third cell phone from Verizon. Try understanding your bill. I spent 31 minutes on the phone with them yesterday and was quoted $40 a month, then $65 a month, then back to $40 and then, finally when the manager called two hours later, eventually $20 a month. An amazing mess. I had an old iPhone phone I wanted activated… Too complex.
+ Intel. I’d like to buy a faster, newer laptop, but they don’t seem to have a faster, newer chip. Whatever happened to their innovation? They focusing on stupid new stuff they don’t understand.
+ Microsoft. In ten years, they haven’t introduced a product that excites me. I’m still using Office 2003.
+ Apple. I’d like to buy an iPhone 6. I’d like to upgrade my old software. But I dislike their new iPhone software upgrade. (Fortunately, I bought back a little when it dropped dramatically. And it seems to be edging up.)
The Internet is where the big bucks are made. The Queen of the Internet is Mary Meeker. Her presentations are treasured. I’d hoped to excerpt her latest one this morning, but ran out of time. I’ll pick the highlights tomorrow. Meantime, here’s her entire long presentation. It’s really good.
Download it. Click Internet_Trends_2014.
Eric Snowden interview with Brian Williams.
To watch the full interview on YouTube, click here.
The French Open has started. It’s on The Tennis Channel. Roland Garros’ official site is here.
Harry Newton who watched a little of the French Open and then went out yesterday afternoon and played aggressively. It worked… Tennis, like life, rewards the aggressor. It’s a better form of happiness than upended toilet seats. One lady friend, however, emailed, she loves her husband so strongly she raises the seat for him. This woman is an angel.
I watched the interview with Edward Snowden last night. He is super smart, articulate, sincere and honorable. He took the hardball questions Williams pitched and knocked them out of the ball park. The man is a patriot in the true sense of the word, sacrificing himself to warn us of serious government abuses that threaten that for which America stands. Thanks to Snowden via this interview and the recent Frontline program “The United States of Secrets,” we now know president Bush lied when he told us the NSA wasn’t targeting Americans; president Obama lied when he told us no one was listening to our phone conversations or reading our emails; James Clapper, Director of National Intelligence, lied to us and to congress when he denied the NSA collected bulk data on Americans. No wonder they hate Snowden. He exposed them for the liars they are. In my opinion, since 9/11 our country has lost its way. Using the ostensible threat of “terrorism” they have systematically stripped away our civil liberties. Anyone who objects is deemed an enemy and is targeted for elimination…..either figuratively or literally. In my opinion we need more Edward Snowdens and less Bushes, Obamas, Clappers, et al.
Here Here-Back in the day i used to interact with the CIA-they were a bunch of arrogant morons.If you wanted to work with them it was always their way-they wanted to know what information you had to share and they shared nada. Are they smart-yes book smart -but not street smart. We found all this out on 9-1-1. Then they use 911 to scare the politicians into going against the Constitution. The NSA uses the military for all their expensive dirty work like language interpreters and recording signals and calls. Wake up Americans!