Friday, November 12, 2010

Californians Drinking Irish Beer

Most financial advisors today are telling their clients to invest in bonds because they are safe and that way they will not lose money in the "dangerous" stock market.

Most Americans think bonds are a risk free asset that just pays them a monthly interest payment.

The following chart shows the PIMCO Municipal Income Fund II.  Municipal bonds are state debt.  Most states are currently bankrupt and most bonds will go to zero if a bail out does not come soon.

The cliff dive to the left of the chart shows investors getting slaughtered in this fund.  Losing money.  Losing their retirement.  Enjoying the "safety."



The next chart shows PIMCO's California Municipal Income Fund II.  The slaughtering is a little more extreme. 



Much more pain ahead for the investors currently sitting in their "safe" bond funds.  Currently sitting in the greatest asset bubble ever seen, soon to explode around the world.

Stay tuned.

h/t Barry Ritholtz

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