Bond investors bailing out of bond funds in unprecedented amounts – experts say more to come. It’s about time they got the joke. Stocks are better investments – at least for now.

There has never been as much money yanked out of bond funds as have been withdrawn in the last month (see charts from Yardeni and Trimtabs as reported by CNBC below). The gurus at PIMCO are putting on a brave face but the irrational accumulation of bonds witnessed since the Great Recession appears to be over.  It is perhaps a signal event of how investors can and will allocate away from perceived risk and toward perceived return in a world of 24/7 financial news flow.  Keep in mind – the reasons for the bond sales are uniformly positive for stocks.  The putative driver for the recent bond liquidation – the Fed’s prospect for reducing Quantitative Easing – is indicative an improving economy and therefore improving corporate earnings.  Not surprisingly the Street estimates for earnings show a sharp pick up for the next 12 months.  The so called “great rotation” from bonds to stocks may be upon us.  The timing seems right as we are entering 2Q earnings season with a record number of negative earnings warnings.  Corporate execs have set the bar low and primed the market for “better than expected” results.  If we are entering the “great rotation” then we all want to be leveraged long –eh?  Jeb B. Terry, Sr. July 6, 2013

Bond outflows - Yardeni ICI 6-2013Bond outflows Trimtabs CNBC 6-2013

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