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Where do you get safety and income? You get it from bonds. So, they went out to buy bonds, and by the time that period was over, they owned many more bonds than they did it at its start. When people opt for simple mantras, they usually overlook something. What they overlooked in this case was the fact that bonds don't give you safety and income, regardless of what you pay for them. One of my constant themes is that there is no such thing as a good idea other than in the context of price.
So people overpaid for bonds, especially high grades and Treasuries, and bid them up too high. I think there was a lot of pain quickly after [Fed chairman Ben] Bernanke hinted at the tapering off of the QE program, the bond-buying program, and I think that did change some attitudes. So, I would hope that people are not so blindly in love with bonds regardless the price now.
So I think a shorter answer to your question, which you probably wouldn't mind, Jason, is probably that equities, yeah, got cheap relative to bonds.
Another area that's gotten cheaper lately is emerging markets. Four years ago, everybody thought that it was over for the developed world of the United States, Europe and Japan, but that China and the other emerging markets had unlimited potential. So, again, the developed-world stocks languished and the Chinese stocks soared. And the U.S. stocks got too cheap, and the Chinese stocks got too expensive. Now that's been somewhat redressed. I think that Chinese stocks--I don't know, I am not talking about the fundamentals of the economy in the short term and I am not talking about them in detail, but I do think that the emerging markets have gotten cheaper relative to developed world and deserve a look.
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Comments
Oh it sounds like Scott likes going long on wood.