January 12, 2005               Just some notes, primarily on inverse bond funds

 

I am reading an article where the author is expecting and preparing for rising interest rates.  The article is from the January 2005 issue of Martin Weiss' Safe Money Report.  Martin is known as a "perma bear".  I do find his work to be a bit over the top and perhaps slanted towards fear (just my opinion, and I do respect his opinion).  In this issue, he interviewed Bill Donoghue, whom Martin credits him  with being " a leading money and mutual fund expert of the '80's".  I have not performed any due diligence on Mr. Donoghue, and have only mentioned a few of his ideas here.  These ideas are not in full context, and I am certainly not recommending any of the investments he discusses.

1.    Claims that neither Vanguard or Fidelity offer any funds to make money in a falling market.

2.    Look at "Inverse Bond Funds".  He didn't mention this, but you could search that term on Google.  He feels interest rates will rise.  Look at Rydex Juno Fund (RYJUX).    Watch the 10 year treasury closely.  Incidentally,  the 10Year as of right now is at 4.236.  Looks like it has dropped a little over the last few days.  See our mention on 1/10/05, item 3.  He says "start investing in Potomac Contra Bond Fund".  He claims the duration of the fund is "minus 18".  Duration of minus 18, means that for a 1% change in 10 year rates, the fund would change by 18%.  He claimed that  if he were pressed for a long term buy and hold investment, he would consider Fidelity Strategic Income Fund (FSICX).