Yesterday morning Zara and I discussed what may be troubling the stock market and how 401(k) participants (and the rest of us for that matter) should be viewing their bond exposure. With that in mind, here's a little something I wrote, but hadn't yet posted, after watching Kudlow and Company the other day:
"Why not buy a 2.8% ten year treasury?" asked Larry Kudlow this afternoon on the television show that bears his name---after he predicted virtually no pickup in growth the 2nd half of the year. Well, Larry, it's because 2.8% ain't worth the risk. If bondholders decide---due to growth, QE taper, or simply coming to their senses---to bail, you'll know in a hurry why you don't buy the 2.8% U.S. treasury. In other words a 2.8% yield (and any pickup in price if rates recede) is not nearly enough compensation for the downside potential in today's bond market (regardless of the likelihood, or lack thereof, of a selloff this year) .
(Correction: In the video, where I say the 10 year treasury bottomed at 1%, I meant 1.5%)
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