Despised Treasuries Beat Stocks Over 30 Years for First Time Since 1861

Here the Bloomberg report
Oct. 31 (Bloomberg) -- The biggest bond gains in almost a decade have pushed returns on Treasuries above stocks over the past 30 years, the first time that’s happened since before the Civil War. 
Long-term government bonds have gained 11.5 percent a year on average over the past three decades, beating the 10.8 percent increase in the S&P 500, said Jim Bianco, president of Bianco Research in Chicago. Investors seeking safety following the collapse of Lehman Brothers Holdings Inc. in September 2008 fueled demand for debt and upended the notion that equities rising along with corporate growth must offer the best gains. 

[...] Not only have bonds knocked stocks from their perch as the dominant long-term investment, their returns proved everyone from Bill Gross to Meredith Whitney and Nassim Nicholas Taleb wrong

The generation-long outperformance of bonds over stocks has been the biggest investment theme that everyone has just gotten plain wrong,” Bianco said in an Oct. 26 telephone interview. “It’s such an ingrained idea in everyone’s head that such low yields should be shunned in favor of stocks, that no one wants to disrupt the idea, never mind the fact that it has been off.”
Another proof that "when it's obvious to the public, it's obviously wrong" and that inflationists are plain wrong.

That said, I do not expect the bonds to beat equities for the next 30 years. But it's still highly likely that high-quality short term bonds (are there many left?) will beat it until the end of the Greater Depression.


Tiho said...

Another proof that "when it's obvious to the public, it's obviously wrong" and that inflationists are plain wrong.

That comment is so so so stupid. No one was talking about deflation 30 years ago. No one. After 2007 everyone is talking about it. Today everyone is talking about deflation, including you. You are all Johnny Come Lately's.

Therefore this is another proof that you are the public, buying bonds with mums and dads, while the rest of us smart ones recommend buying commodities because for the next 10, 20, 30 years... inflation is coming.

We all know printing money in EU and US and ajapan is going to destroy government bond returns and currencies. But you keep saying we are going to deflate and bonds will be a great investment (until maybe today coz you finally woke up).

I have argued such topic on your blog many many times. I can see more and more than everyone you say, the opposite happens! That is why I stick around, it helps me make money hehe!

Tiho said...

Don't mind the mistakes... iPad autocorrect is shit. =]

pej said...

Don't worry about the typos.

I don't own bonds, and haven't had for a long time. Not long nor short.

But bonds have been despised for a long time. Do some research.

Moreover, it's not because I post about the news that I find interesting that I trade on them.

My blog is also my diary (although I wrote far less than what I would like to).

Tiho said...

Hahaha. You recommend and claim bonds are a great investment on consistent basis... pretty much parroting whatever Gary Shilling says.

pej said...

If you say I've been recommending them, you are kind of saying that I have made a good call? right?

Yet again, it's not because I write about them that I recommend them.

pej said...

Then again, if it would have been a recommendation, it would have been a pretty good one dude: http://realitylenses.blogspot.com/2011/11/despised-treasuries-put-in-their-best.html

But then again, you'll start mocking again with no fundamental reason :-)

Tiho said...

I don't use fundementals nor do I use reasoning. That is what economists, anaylists, gurus and experts do.

I just go against the crowd when the noise becomes historic. And the noise on bonds is now historic after 30 years bull market that started in September 1981. Today guys like you, tell people to buy it, while smart money is selling...

In the next 30 years some young investors will stumble on this blog by accident and see you recommanding bonds and talking deflation from late 08 to now. Then they will look at the chart, which will be at 15% interest rate, and realize you were a bull on top!

pej said...

Well, guess what? My time horizon is not 30 years to begin with. And treasuries have been doing better than stocks.

And I'm not buying them at these levels. But, suppose you point a gun on my head and ask me to put all my money for the next 2 years on either the S&P 500 or 2 years treasuries, I would chose treasuries.

This is my point. Nothing less, nothing more. I am not saying you should buy treasuries and hold them for 30 years. Nor will you buy your crude or cotton contract and keep them for 30 years.

Tiho said...

Well say you put a gun to my head... I'll tell you that stocks will beat bonds from here coz they will print money!

pej said...

OK! Let's put a date in our calendars, and reassess on the first of Nov 2013!

Tiho said...

I'm talking a 10 year annaulised return. No one in any industry measures any investment on one or two year return, bless its HFT computer algos or short term gamblers.

10 Yr annaulised return is a standard measure. Over the coming decade, stocks will average a higher annual rate of return than treasury bonds!

pej said...

I don't have a fixed term duration for my investment, so I don't need to say '10 years' or '30 years' or whatever.

What matters to me is that in a given period of time, they will outperform.

If you want to talk about a fixed, 10 year period, then my view is neutral (means: I do not have a view) it will depend on how long will they make the Greater Depression last.