Woke up this morning to hear the Muppet baiting Vampire Squid thinks you should sell bonds and buy equity. The term "secular" even turned up in the research. Hey, they could have just read The Contrarian Corner in Nov. and January ! The funny thing is the customers would like to know this stuff before the market moves.
Away from the moment, our base case remains one of Baby Boomer Heartache...possibly heartbreak. First, the dream scenario: Hard work, heavy 401k contributions and matching funds, a McManz and kids with plenty of college debt (that mom and dad will pay if needed after with house sale). Somewhere during the lampshade on head period of the credit super cycle keg party, the purchase of a second home in better climes sneaks into the picture. Well, you know the rest.
So, after avoiding bonds for a generation of inflationary mean reversion, into the FI pit the Lemmings - I mean Boomers go. The Government happily accommodates the Narcissistic Generation with plenty of paper. The Fed buys copious amounts too in a leadership role. Foreigners, after decades of purchases, begin to offload the IOUs. According to flow of funds data from 2007 to 2011 citizens sold 409B in equity holdings and plowed 792B into bond funds. (I am not even sure if that includes ETF instruments) The risk free rate was zero and real yields were deeply negative.
The opining now centers on the Fed's policies "hurting" savers. In reality, a higher return would create a burden of taxation on earners to meet the higher interest costs. Boomers wanted million dollar homes but not million dollar assessments and now want higher Treasury coupons but not higher taxes. I'm at that back of the Boomer line. There is a ton of fiscal ranting in the cue in front of me. You can't do anything about when you were born. We see plenty of disappointment still ahead.