Anyone care to wonder why the stock market has given you effectively no return over the last decade?  Did you know that American family incomes as of the end of 2010 were 7.1% below where they were during the peak in 1999?

In 1999, oil was $17 and today it is $88.25, gas averaged $1.17 per gallon and is now $3.84 here in California, and a pound of ground beef in 1999 cost $2.25 and now costs $3.87.  Did I mention gold was $290.25 at the end of 1999 versus $1,660 today?

If you wonder what has happened to the stock market, the economy and the American worker, you now know.  What is going to change over the next decade?  Are all of these things going to get cheaper so that Americans have more money to spend and drive economic growth?

What about corporate bonds?  What would make them a good investment under these conditions?  Most companies that produce these goods or services borrow money from Wall Street.  They do so through investment banks that structure the loans or bonds and then in turn sell them to insurance companies, other banks, and mutual funds among others, including to Peritus on behalf of our individual clients and the ETF we manage.  We get what we view as a high interest rate and have a contracted maturity date, at which time the company promises to pay the money back.  Corporate bonds are not readily available to individuals because they don’t trade on an exchange and there are very high barriers to entry from a financial qualification standpoint, but in our accounts and funds, we are able to buy them for our clients.

Given what is going on why wouldn’t bonds be a bigger allocation than stocks?  Americans, actuaries and the Wall Street propaganda machine wants you to believe that stocks will give you a high return.  At times, this is true but it seems that the stars must be aligned and hell needs to start cooling before this will happen longer term.  The world’s economy is just not fertile enough to justify high equity prices and the last time I checked corporate debt is still on top of the capital structure of every corporation in America, while stocks are the hard wood floors.

Happy Investing.