Asset Class Moves February 11, 2013

Stocks were down -0.06%
Bonds were down -0.12%
US Dollar was fairly unchanged versus a basket of world currencies, and the Euro
Asian & European stocks were down a little.
Gold was down.
Oil was up.

– –


What was an under-recognized, but important story today in asset classes?

While the Yahoo! headline focused on stocks: “Wall Street Dips From Multiyear Highs”

Maybe a more important, and often quieter, trend was:  Bonds continued to decline in price.

BND, the Vanguard broad bond ETF, declined -0.12%, a significant drop for bonds.  More notably, as shown in the image below, bonds are declining to around 9-month lows.

Bonds 1 Year Peformance Feb 11 2013

Bonds and stocks often move in contrary pricing directions.  But today, stocks began down, and bonds also began down, staying down the whole day.

BND One Day Feb 11 2013

Why am I focusing on bonds’ decline in price?

To create wealth, you have to know where to focus your attention, when more people are focused on other things.

I don’t have time today to re-visit widely-expressed concerns about bonds.  But in summary:  With interest rates at historically-low and governmentally-altered levels, risks to bond principal values appear to still be strong.

A natural question that comes to mind might be:  If bonds are near the low end of their one year price range, shouldn’t a person buy more bonds?  Maybe.  Maybe not.  But to understand bond valuations, it is probably better to look at a chart for bond prices going back to 1980, or even 1970 or further back.

These are issues worth discussing with your financial advisors in this time window.

– –

Disclaimer:  These posts are not written by a professional or licensed financial advisor.  There’s nothing for sale here.  This is just a discussion forum.  No one should make any decisions based on representations made on this informal blog.  These posts are just one layperson’s opinions, concerns, and observations about asset classes – a part of larger, never-ending discussions.  Any significant financial decision should be discussed with at least a few trusted and experienced financial advisors before acting.

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