Last week, I was in New Orleans at the New Orleans Investment Conference and had the opportunity to give a presentation, but also check out some awesome presentations. From Peter Schiff to Robert Prechter to Dennis Gartman to Mark Faber – I was like a 10 year old at Christmas listening to so many others that I hold in very high regard.
One theme that continually showed up over and over was how bonds are overvalued and due to drop. Now don’t get me wrong, I said the exact same thing in my presentation. With interest rates near historical lows and the average investor (usually dumb money) pouring money into bond funds month after month, this is one area that I think could be very top heavy. Heck, as of September nearly a trillion dollars had moved into bond funds as of the March 2009 lows.
That’s where I’m hit with this conundrum. It was eye opening how everyone at the conference said the exact same thing about bonds here. There’s just no way they can go higher from this point is the quick summary of what they all figured.
It reminded me of the famous General Patton quote, “If everyone is thinking alike, then somebody isn’t thinking.”
Then I read in Barron’s over the weekend in their recent Big Money poll that 89% of those interviewed think bonds are overvalued! So it seems like a crowded trade based on the massive inflows from the public, but on the other hand everyone who is supposedly ‘smart’ all think exactly the same.
I honestly have no clue what to think at this point. Both arguments make a lot of sense to me. I have 20% of my 401k in bonds and I’m ok with that. Maybe the best trades are those you don’t take because you don’t have an edge and in the near-term I simply don’t know what to think of bonds here.
Take a minute and let me know what you think of bonds here in the comments section below.