Most Individual Investors Still Wrong!

The investing year isn't quite over but the returns are in for Treasury bonds in 2009 - and it ain't pretty. We wrote last week that individual investors fled in droves to supposedly risk free Treasuries in 2009, dumping $357 billion into bond mutual funds (much of it going into Treasuries) through the first 11 months of the year, while actually pulling money out of stock mutual funds. The S&P 500 is up over 20% on the year while Treasury bonds have lost almost 15% because of the (inevitable) backup in interest rates from record lows in 2008. No straight lines in nature or the markets, but rising interest rates are waiting for all of us over the next few decades as we pay the piper for our bumbling Federal Government's complete mismanagement of fiscal and monetary policy over the last 20-years. Of course, forecasting rising interest rates is the same as forecasting rising inflation, since real interest rates (interest adjusted for inflation) are fairly constant at between 1% and 2%.