Bonds

Federal spending looks to stay high for a long time, thanks to Washington’s inability to pass a reasonable budget. Politicians float proposals that effectively fleece retirees and taxpayers. Bond investors should also take warning: The supply of Treasury bonds to fund these chronically high government outlays keeps increasing, making the bonds ever-cheaper and hurting fixed-income portfolios. 

April 29 marks four years since the U.S. government last passed a budget. Based on the budget he proposed, it seems that President Barack Obama intends to keep the streak going.

The stock market has done very well so far this year. But if you are at or close to retirement, bond investments should still be a significant portion of your portfolio. With bonds, you can get a healthy return, and use clever strategies to keep risk to a minimum.

The conventional wisdom that the stock market is an indicator of the economy’s direction is not valid this time. Especially after this winter’s broad stock rally, it is obvious that stock performance is divorced from economic growth. On the contrary, investors should have a strategy prepared for a potential economic downturn.

Cyprus’ recent banking crisis shows how easily government can erode your bank deposits. In Cyprus, it is through outright confiscation. In the U.S., it is through low interest rates and inflation. But there are ways for Americans to offset this problem.

The job market recovery fared even worse than expected in March. This is bad news for job hunters, but it’s equally bad for your savings, since continued monetary stimulus might lead to runaway inflation.

When the unemployment rate declines, even by a little bit, it should be good news. But when it declines because people are leaving the workforce in record numbers, it’s not.

With the market up around more than 10% this year, pessimists love to speculate on all that could trip it up, from a new Korean conflict to tepid U.S. economic growth to more European turmoil. Too few focus on the bigger risk: fed-up bond investors shift en masse to the stock market and overheat it.

Taxes are higher for just about everyone, but high-earners bear the brunt of the expiration of the Bush tax cuts. The harsh reality is that there are few ways to increase your earnings without a bigger slice of it going to the government.

The difficulty with the tax deal that Congress enacted at the beginning of the year is that it offers few options for avoiding any additional taxes other than producing less income.

How should investors react to government plans possibly harming their retirement  savings? By carefully watching what the feds are up to. While no threat has appeared lately, Washington has a worrisome history of upending investments.

Exchange-traded funds are often-unsung investments have many virtues, particularly tax efficiency and focus on market indexes, thus avoiding shoot-the-moon trading tactics. Alas, investors often confuse ETFs with things called exchange-traded notes, which carry too much risk.

Investing can be a lot of fun but can also be (and should be) a lot of work. At our firm, my team spends countless hours poring over balance sheets, charts and economic data to make sure our clients have the best investments for the appropriate amount of risk.

The market has had spring rallies every year for the past decade. More disturbingly, right now the markets seem to echo 2007, when the last bull market ended. Investors need to be on the lookout for history repeating itself.

The similarities between 2012 and 2013 are impressive. The February 2012 jobs release – not the final, revised number, but the original release – was 227,000 jobs. The February 2013 release counted 236,000 new jobs. February 2013 and February 2012 both reported increases of 0.72% from January.