Bond. Government, Bond

FOR IMMEDIATE RELEASE
Marietta, Georgia, United States of America (Free-Press-Release.com) February 13, 2012 -- Here we are about to start year 4 since our last big crash in the equities market. When will the next crash occur? It’s odd; we all wear our seat belts everyday even though we are not guaranteed to be in a car crash. However, with investing in the stock market it is guaranteed that there is always going to be a crash in the future, yet most investors have no exit strategy.

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Bond. Government, Bond

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http://www.diversifyyourassets.com

Not wearing a seat belt, during a car crash, can end your life. Not having an exit strategy can wipe out 10+ years of gains in your account. At Eleven Two Fund Management I have an exit strategy for all of my clients, except those in fixed income or my debt free stock strategy. What will happen to your accounts during the next inevitable crash? Will it lose 30 or 50% of its value? Or will it only lose a little, none, or have a gain? We all want our accounts to grow when our friends’ accounts are growing. However, it is much important for our accounts not to tank in value, when our friends do. Do the math yourself! If your account goes down 25%, then it has to go up 33%, just to get back to its starting point.

The US Government Long Bond

Interest rates in 2011 continued to go down and therefore bonds went up. As I write this newsletter on February 1st, one of the things in all of the markets that jump out to me is the U.S. government long bond. I believe that sometime during the next 3 months we are going to see interest rates go up substantially on the US government long bond. The U.S. government bond, right now, in my opinion is extremely overbought. Investors have been moving into it thinking that interest rates are going to continue to go down.

Many of you that are reading this probably interpret what I am saying, regarding interest rates going up, to mean that I believe that we’re going to have inflation and that interest rates are going to go up because of money printing and that’s not necessarily what I’m trying to communicate. What I am in fact trying to communicate is not in a statement about where interest rates are going to go long term because of the underlying fundamentals of what the government is doing.

What I am simply stating is that interest rates already looked like they were going to start going up early last summer and then we had the Greek debt crisis that postponed at that time interest rates going up. Now we’ve gotten to a point where everyone has flocked into the US long-term government bond. The long-term government bond market is not an extremely large market when you compare it to say the U.S. dollar or the U.S. stock market. The bond market is large but it’s one of those markets where it can take severe whips when large numbers of investors try to flock in and flock out of it. I believe we will see large numbers of investors flock out of the long-term government bond and you’ll see ETFs like TLT drop dramatically. If interest rates do go up, then many of my clients are positioned to benefit from it.

Individual Stock Management

I have a client that moved into this strategy on September 12th, 2011. I met him in Coeur D’Alene Idaho, when I spoke at the Compass Financial Forum last summer. He reviewed all of the historical performance on the virtual portfolio of these stocks that have been kept by Marketocracy since February 2003. I explained to him that this is my most aggressive strategy and that his account would move just like the US stock market. He said he was fine with that, which is surprising considering he is 76 years old. Anyway, he ended up getting in at a good time. Since 09/12/2011, his account is up 24.25%. Four of the stocks he bought in September are up over 40%. His account will go down with the market because I have no exit strategy on these stocks. However, he has a long term mindset and I believe he will do quite well. Over the past 9 years these stocks (in a virtual portfolio) have an annualized return of 18%, after a 1.95% management fee and commissions or net.

More information can be found online at http://www.diversifyyourassets.com

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