A Will Rogers Market

Will Rogers once reportedly said "it isn't the return on my money that I am concerned about. it is the return of my money." That is the problem in the credit markets lately. Prieur du Plessis thinks it is late in the game for the flight to safety in bonds:

US Long Bonds in Injury Time

Since the advent of the credit crisis, stock markets, real estate and the US dollar have been the subject of investors’ angst. However, two markets – commodities and long bonds – have remained in bullish trends. That, at least, is the way it looked until recently.

The Reuters/Jeffries CRB Index hit a peak on March 13, and I argued in a subsequent post that although a correction was overdue, the long-term trend was still upwards.

But what about the outlook for US bonds, especially as yields have edged up since the recent lows of 3.314% (March 17) and 4.165% (March 20) for the 10-year and 30-year Treasury Note respectively?

The graph below shows the long-term movement of the yield on the US 10-year Treasury Note, indicating that long-dated US bonds have experienced a multi-year bull market and are trading at levels last seen more than 40 years ago as far as nominal yields are concerned and 28 years ago in real terms. Thinking of which, the only investors who first-hand experienced the last major bear market in bonds (from 1971 to 1980) are now all on the wrong side of 50!

He continues with charts and illustration at this link: Investment Postcard From Capetown.
I agree with Mr. Du Plessis comments but we must not forget that if the Fed moves fail to stem the tide of credit contraction we could see a situation like Japan experienced, where even 0% rates couldn't stimulate activity. Japanese bond prices went far higher than anyone thought possible because people wanted to be sure of the return OF their money.