In another thread laurence asked me about my long bond strategy. In case there's general interest, or just for amusement, I thought to share it here
The idea is that during some periods investing in declining interest rates is more profitable than investing in stocks given the risk premia of stocks. Here's a paper on the idea
http://www.membersocieties.org/austi...shed_Study.pdf
For example, from 1982-2000, an investor who bought 30 year zeros and rolled them over YOY, enjoyed 4.2 times what the investor in the S&P500 enjoyed. Unfortunately this is privately paid research I can't post, and even more unfortunately I wasn't investing back then!
At any rate we're in another little period here, with stocks declining and the long bond up 20%+ over the same period. All it takes is investing for economic growth (stocks), or guessing we have to suffer some economic decline (bonds).
PS - those Hoisington folks are geniuses. They've beaten general bond market returns for 20+ years. If you want an education read their investment updates at
Economic Overview
enjoy!
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