Here is an eye opener . . . 10 year Treasury rate hit a 220 YEAR low earlier this year.

A recent research piece from BofA Merrill Lynch included the following chart.  Merrill has been championing a concept called the “Great Rotation” where they see a massive and prolonged rotation out of bonds – particularly government bonds – and into stocks.  This rotation is expected to become obvious in “spring 2013”.  Their analyst, Michael Hartnett states “the era of bond outperformance has ended.  Equities have staged a remarkable stealth rally . . .”  I could not be in stronger agreement.  The fact that yields are at a 220 year low in the face of multiple improving economic growth metrics tells me that bond prices are a joke and have extreme downside risk.  The current rate of 1.7% implies a “P/E” ratio for the 10 yr. Treasury of 58X compared to a 2013 S&P 500 P/E ratio of 12.5X.  Jeb B. Terry, Sr. 12-15-12

10 yr Treas Rate at 220 yr low 12-14-12

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