Q2: Fade Forecasts and Diversify

July 1 is one of my favorite days of the year. In addition to a wealth of historical milestones today (See Jason Zweig’s, “This Day in Financial History”), and the coming July 4 holiday weekend, it also marks the start of the second half of the year. As such, it is a good time to look back to see how we got to where we are today.

We begin with the opening salvo from the economists, who when surveyed by Bloomberg at the beginning of the year, all predicted rising interest rates and falling bond prices. As Bob Farrell has admonished us so many times over the course of his career, “When all the experts and forecasts agree — something else is going to happen.” Had you ignored the dismal scientists and followed Farrell’s advice, perhaps purchasing the iShares Barclays 20+ Year Treasury Bond exchange-traded fund, your year-to-date gain would have been more than 11 percent.

Alternatively, you could have listened to the economists, and purchased the ProShares UltraPro Short 20+ Year Treasury ETF. In the first two quarters of the year, that lost more than 33 percent of its value.

So much for expert predictions of a great shift out of bonds and into stocks.

Continues here

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