Just a quick thought here - we're in an environment where without the policy actions of the Fed, we probably would have an inverted yield curve. Remember that an inverted curve is the bond market's way of saying we're expecting a recession. Step 1 was to bring short term rates artificially low, and so with short term interest rates held at zero it will be impossible to use the yield curve as a means of predicting recession. Now with Operation Twist it seems the Fed is buying the absolute worst maturity length bond it could possibly buy in a continued effort to stimulate growth.
In general I think a rule of thumb for investing is to wait until the Fed has acted, and that's your signal that the party is over. Now the smartest big bond funds are looking for the exits, and guess who steps up to the plate to buy all of the over valued bonds? That's right, your friendly neighborhood central bank! It's not like the Fed is looking to make some great investment for tax payers. They have effectively decided to take a terrible investment now, and distribute the cost of that investment over the course of the next many years. The beneficiaries of their terribly timed buy are those investment banks that held on to their bonds with a death grip for the past 20 years until the absolute last minute spike of the bubble. And sure enough, government steps in to take the hit, buying at the peak, and the big bond investment businesses win by unloading to the Fed. ...If I understand correctly, that's my interpretation.
TMV is already looking to be my favorite ETF pick for the foreseeable future, maybe even beyond. ...And I thought 30 year bond rates were terrible before! "Don't fight the Fed" is a good policy but I'd assume that the Fed having laid out its plan means that the purchases are already anticipated in the market prices. Time to start looking for ways to short those long term maturity bonds!
I want to highlight scooter186's red thumb pitch for an ultra long gold ETF (ticker UGL) made early this year. He quotes Warren Buffett from an interview done about a year ago when gold was some 30% lower than today and UGL has since rallied over 75%. [more]