Jay wrote:

- quote -

To your first point; the fact the stocks are at or near their high is
not necessarily a sign they are at a top, or poised for decline. Look at
an S&P chart (yahoo shows a nice one) and you'll see that the market
spent much of the 80's and nearly all of the 90's at a high. This can
turn into a long lecture, so I'll stop with that observation.

If rates have peaked and are due to fall, I'd suspect that would be a
good source of fuel for further market gains, companies like to borrow
more money at lower rates to expand their business. At this point in the
cycle, my own gut says bonds have as much room to fall as rise. The
shape of the yield curve, inverted, points toward the short term rates
dropping, and longer term rising to get back to normal. As far as the
prediction toward recession, I'm not on that bandwagon.

JOE

On Jul 4, 5:36 am, Jay <jay6...[at]hotmail.com> wrote:

- quote -

There are too many variables that affect long term bond rates.
Even predicting which way the fed funds rate will go is not a
no-brainer. My prediction based on the blogs I read is that
rates (especially for long term bonds) will head higher before
they head lower, so for now I'm staying away from bonds.
Only when the long term bond has a better yield than what
I can get in a regular money market fund will it be worth
the risk of investing in it.

But you have to make the call for yourself independently!

Anoop

Jay <jay6447[at]hotmail.com> writes:

- quote -

People don't usually hold bonds so they will "appreciate". Unless you
think you can predict the economy and Fed decisions better than all
the big institutional investors out there, you're best off thinking of
bonds as an income-producing investment instead of something you can
make money on by betting on the short-term direction of interest
rates. (Heck, even Bill Gross has managed to screw that up recently.)

So, if you've decided your long-term asset allocation plan calls for
more bonds, just go ahead and buy more bonds. If you want to invest
in individual bonds, I think it would make sense to build a bond
ladder with different durations to start with. For a bond fund, you
might DCA in, or divide your money between short, intermediate, and
long term funds, or pick a good core bond fund and let its manager
worry about predicting the Fed and where the best returns are likely
to be.

-Sandra the cynic

This is what we know: Stock markets are at a high and interest rates
may have peaked or may be 25bp away from a peak. So, for a long-term
investor this should be a good time to increase allocation to bonds. I
am thinking of increasing my allocation to the Long-term bond fund in
my portfolio over the next three months - does this make sense?

Now, anything can happen, but if the interest rates do peak around
here and actually start heading lower from here over the next few
years - is my understanding correct -> that the Long-term bond fund
will appreciate during these next few years?

Thanks,
Jay