As you probably know by now we watch and sometimes worry over what the crowd does. Coincidentally from our last quarter performance cover letter:
… When the tide goes out we see who has been swimming without clothes. While it will not be us, the current is sometimes strong for all….
Due Diligence Meeting Takeaway
Earlier in August I attended a due diligence meeting in the land of the Longhorn. One of the key takeaways from this meeting can be seen on this chart presented at the meeting.
This chart compares the industry money flows to this company, Dimensional. Our concerns are especially deep in the fixed income arena, as we feel many are hiding in certain areas of the fixed income asset class without knowing the risks …. Especially in High Yield (we have long avoided.)
This due diligence meeting was well worth it, as we were impressed with this firms logic, depth and restricted access by investors. We are beginning to integrate into portfolios.
Have a Great Monday …. Sorry so heavy, but we felt it worth discussing!
John A. Kvale CFA, CFP
http://www.jkfinancialinc.com http://www.street-cents.com 8222 Douglas Ave # 590 Dallas, TX 75225
$treet-¢ents 
The Short Term Inverse Relationship Between Rates and Bonds
After over a decade of not only lowering of rates, but SUPER low, interest rates, it is no wonder we have forgotten the short term relationship of bonds and interest rates.
Inverse Buddies
Over the short term, when rates are going down bonds go up and just the opposite as rates are increased. Pair that with extremely low – zero – rates and the gradual increase in rates, which causes a natural headwind has caught many by surprise, especially after over a decade of lowered and low rates.
Ok, so it is a little busy – but it directly shows our point – as rates go down, bonds go up and then as rates go up bonds down. This is a short term phenomenon as once rates stabilize, bonds do as well.
We are happily welcoming higher rates as we think they are much needed – even though they present headwinds for a much needed safe asset class, Bonds – in the SHORT term!
Have a Great “Rate Bond Buddy” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents
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Posted in FOMC, Interest Rates, Investing/Financial Planning, Market Comments
Tagged Bonds, Fixed Income, Interest Rates