Behold the power of the financial media!
In a new blog posting "Inflection Points: Why Demand for Bonds Will Rebound" on Pimco's website, COO Douglas Hodge argues that the media are in part to blame for the recent rush out of bonds.
Don't believe the "media" hype about bonds, says Hodge.
"In the aftermath of the financial crisis, the media – which play a large role in setting the tone of the markets and the psyche of investors – went from being cheerleaders for bonds, stressing their virtues and role in maintaining a diversified portfolio, to romancing the notion that bonds are riskier than stocks."
The Daily Ticker's Lauren Lyster asked Yahoo! Finance senior columnist Mike Santoli what he thinks of Hodge's assertion: "I don't think the media caused the backup in interest rates that occurred," says Santoli.
But wait, Santoli graciously takes a bullet for financial media as a whole. "Did we over-anticipate the possibility that we could have a bond market shakeout or a panic or a rout? Probably so, I think, in aggregate."
Wall Street, especially self-interested equity investors, share some of the blame too, according to Santoli.
Pimco -- home of bond king Bill Gross -- is also assuming that the general public even gets all this back and forth about the bond market. According to various reports, it's not clear at all that Americans really get how rising interest rates kill bonds. A recent survey by Edward Jones claims "63% of Americans don’t know how rising interest rates will impact investment portfolios such as 401(k)s, IRAs and other savings platforms." And 24% say they are "completely in the dark" about the potential fallout.
Wherever you fall in the debate about who caused the rush out of bonds, Pimco is back to talking its book.
"There are factors – from sentiment to math to demographics – that suggest bond flows will bounce back," says Hodge.
We shall see.
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- Douglas Hodge