The 30-year bond question.

The bond market is for the big boys. That’s why most of the Series Seven questions are about bonds. Stocks aren’t that complicated if you can read an income statement and a balance sheet, but bonds go to the very core of the financial markets. More to the point: if you’re a small investor, you don’t usually buy bonds, you buy bond funds. You don’t have to hold a 30 year treasury fund for 30 years for a little short term security and a little money.

If you think that Dubai, Greece, Spain, etc. may be an indication of the next leg down in the next three months, you might want to be in a 10 or 30 year bond fund. With the current market volatility, when there is a flight to security, yields go down (Treasuries are one place to park your money). Think Dubai 2 weeks ago, but in December yields suddenly started going up especially before and after this week’s auction. I think the big boys are hollowing out a nice big financial fox hole to jump into the next time there’s a flight from risk and to security. Then there is the whole issue of 0.25% federal funds rates and the inability to raise interest rates to stem inflation so treasury buy backs are being experimented with. More than I can fathom anyway. Bottom line: for the average investor Treasury bond funds may be a short term haven from risk and turmoil…very short term. We’ll see.

- JMB

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