Gentlemen may prefer blondes, or at least, they might have in Marilyn Monroe’s heyday. But these days, investors prefer BONDS. So much so, in fact, that bonds are attracting the most capital relative to stocks in history. J.P. Morgan Chase (JPM) found in a recent study that investors added $202 billion into bond funds globally so far this year, while yanking $47 billion from equity funds. As a matter of fact, stocks could see their first yearly outflow since 2008 … despite dramatically different stock market performance in 2016 vs. 2008.
Is it performance chasing? Investors buying what central banks are buying to get rich? People worried about sky-high stock market valuations? A belief in the ‘lower for longer’ theory on interest rates? Likely a combination of all of that. But it’s easy to argue that many bonds are just as wildly overvalued as stocks. That’s why more professional investors are saying to ‘Sell Everything.’
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Mike
It’s worth looking back to another time in history and asking about the liquidity crisis that followed the 1929 collapse. Banks could not fund the increasing withdrawal of deposits which followed with the threat of even more bank failures. It’s worth asking about the current direction of things and why the Fed is carrying an inflated and increased cash balance. How safe are our deposits? How many of the banks could stand a run on their liquidity? Given the explosion of leveraged debt, how safe is cash in a bank? Of course our money is safe now but for how long and are increased levels of gold and silver the protection we need? It is worth going back to 1929 to take a look when the world at large didn’t know what a black swan was. Stay safe.