It all sounds worryingly familiar. Mutual funds are experiencing
record inflows, issuance is at record highs, prices of the
securities concerned seem to be immune to bad news, and the
investment banking divisions covering these popular products are
going gangbusters.
This time, it's not equities that are booming, it's bonds. Will
they crash too?
According to the Investment Company Institute (ICI) in the US,
there was nearly $150 billion net new cash flow into US bond funds
last year, following nearly $100 billion in 2001. Inflows into
government bond funds topped $40 billion in the second half of last
year, money market funds are doing well, savings rates are up.
Insurance companies also have a surfeit of cash to invest, and
they, along with almost everyone else, are avoiding stocks.
Compare that to equity...
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