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Show The Salt Lake Tribune Bond-Fund Binge May Be Example ofBad Timing he headlong rush of money into bond. mu- aggressivegrowth stock funds as the In- tual funds bears all ternet stock the distinguishi marks ofa classic er- boom was peaking in 1999 and. ror in timing. Bond funds are early 2000. Veterans of the game the only broad category that has pro- worry that buyers’ timing fu duced consistently “4 decent results the CHET of years. As day follows night, people who wanted nothing to do with bonds during the runaway stock rise ofthe 1990s now can'tgetenoughofthem. Through first nine months of2002, the Investment Company Institute (ICI) reports, investors bought 7 better now it was then. “This extraordinary cash flow into bond funds raises red flags,” says the Vanguard Group,the biggest U.S, fund manager as ranked by FRC, inacommen: tary prominently featured on its Web site, www.v: com. “Are investors buying bonds for their income and. ment one month doesn't make a trend, we could count on more of the same from funds investing in higherquality bonds during anysustained rise in interestrates. Bond-fund investors have a long-standing reputation for buying heavily at the wrong time. The three biggest years for inflows into bond funds in the 1990s were 1992, 1993. and. 1998. The two worst years for bond-fund performance in the "90s were 1994, when the SalomonBrothers 10-Year Treasury Indexfell. 7.6 percent, and 1999, whenit investin whatever has been. doing well. Trouble is, today’s money can never buy past performance, and in an economy proneto cycles, tomor- in. That eclipses the full-year record for “net new cash flow” of $102.6 billion set in 1986. The 2002 competition for best-selling breed offunds,as reported by Financial Research Corp. (FRC)in Boston, is a two-horse rzce between intermediate-term bond funds, which attracted $29.4 billion from January through formance?” Toget a sense ofthe hazards lurking for newly minted bond bulls, one need only look at funds’ Octoberresults, when the mood changed abruptly in the bond and stock markets. Municipal bond funds tracked by Bloomberg lost almost 2 percent and long-term September, and intermediate. government bond funds 1.9 term government bondfunds, which broughtin $22 billion. We used to see numbers like these in technology and percent. This came as the yield on. the benchmark10year Treasury bendrose from 3.6 percentto 3.9 percent, Weller’s Sells Books as Labor of Love my parents, have always paid myself proportionately with my work,” Weller said. “The Gone With the Wind won the Wellers have nevertaken diviPulitzer in 1937, but Mitchell dends out of the business. We never did publish another book. workfor a wage — a paycheck Special to Lay’s heart, how- that is proportionate with our ever, was the task ofcompiling a labor. It has little bearing on complete set of Ist edition Book our ownership.” of Mormons in multiple According to Weller, some employees earned more money “Tt took us about 15 years to than did his father or mother, put it together. It was like my Lila, and today he is not the child,” said Nay, who, like highest-paid person in the Weller, views hercolleagues as store. “a family — a dysfunctional “T think it is fair to say that family, but a family.” we have spread the earnings of At Weller’s, family traditions the business more equitably do notdie. from the top to the bottom,” he “Even though I am a baby said. boomer ... I have adopted “While we havea big, nicemany of my parents’ looking bookstore here, we are depression-era ideals and, like certainly not taking a lot of the row’s results in bonds are often the opposite of yesterday's. Big as this problem maybe, it is not the whole story in bond funds — which many people use notas a timing vehicle of any kindbutas a longterm investment boasting several attractive properties. Bond funds can be good sources of income, plus valu- able diversification that lends stability to one’s investment plan. Looking in that long-term light, we might view recent the author said her book wasn’t that good and that she was unlikely to write another. largest metro areas. loan-to-value. Car loans are conventional loans at 80 percent 20 percent down, 48-month, new car. Personal loans are for $3,000 24-month unsecured loan Others roughly even proportions — a third in stocks, a third in bonds, a third in money markets, By the end of the 1990s. the proportions hadtilted drastically, and bond funds’ market share had shrunk to a - Date 30-year 15-year Aa This week 6.18 5.59 4.45 453 Last week 6.16 5.56 Lastyear 6.42 5.90 5.39 Car 8.11 8.12 8.58 Personal 14.70 14.94 14.75 Credit card* 13.96 13.94 13.81 “Average has changed from a fixed rate card to a variable rate card. meager12 percent. Stock guess whetherthat share will “performance chasing,”is. stoked by the powerful impulse in the human psycheto risk-dampening qualities, or PRCT ritTiT HN Pin ee ee ee eeewe ee eee eee ee Sank feta Masters sine of ee 10 loranat books and. Sais ® Ge 10 A decade ago, the ICLnumbers show,fund investors tended to keep their moneyin to Bloomberg. That mistake known as are they simply chasing per- Margaret Mitchell, in which moveto right an asset- allocation imbalance that dropped 8.7 percent, according $119.8 billion more ofbond- tome that keeps her from sending her resume elsewhere. She treasures having leafed through a copy of the Oregon Trail in which Charles Russell did 11 original water color il lustrations, and the time she explored a copy of Gone With the Wind which contained a self-deprecating letter from Sunday, November10, 2002 flowsinto bond funds as a funds had five times bond funds’ assets, money funds more than twice as much. Now bond funds are back fund shares than they cashed @ Continued from F-1 \ he ly BUSINESS driving bond prices lower. up to 18 percent. It’s anybody keeprising, or what an appropriate “equilibrium” amount would be. Maybe not33 perconkagain, but surely more than 12. Ideally, as an investor you would like to rebalance ahead of market moves rather than in their wake. In real-world investing, though, you usu- ally havetosettle for less than the ideal. If fund investors’shortterm judgmentis flawed, they still may have made an adjustmentin the longer-term allocation of their money that’s quite appropriate to the age in which they live. Timing isn’t everything. Chet Currier is a Bloomberg Newscolumnist. He can be reached at ccurrier@Bloomberg. net. money home,” Weller added. “We are taking as little as we can afford, which enables us to pay little more to someof the workers — which helps us to keep them.” Employeesalso receive paid Bank Rate Monitor's seasuey of the 10 largest banks and S&Ls in the 10 largest metro ai Date This week Last week Last year MMDA* 0.95 0.95 1.31 cae 1-year 2-1/2-year 1.68 2.27 1.50 1.73 2.32 5-year 3.39 2.31 2.95 3.96 1.53 2.16 Yields oa biggesi meney funds Here are the 15 biggest money-market mutual funds open to individuals with their current seven-day annualized yields. Fund (ranked bysize) Fidelity Cash Reserves Schwab Money Market Fund Vanguard MMR/Prime Port Schwab Value Advantage MF Merrill Lynch CMA Money Fund Morgan Staniey Active Assets MT Morgan Stanley Liquid Asset Fund Smith Bamey Cash Port/Class A Centennial Money Market Trust UBS PaineWebber RMA MF/MM Port Prudential/Command Money Fund Alliance Capital Reserves Nations Cash Reserves/Daily SGA Money Marker Fund/C1 Vanguard Admiral Treasury MMF Avg. taxable moneyfund Tax-free funds Sourees: bankrate.com and iMoneyNet, Inc the store, and each week, the twosome take Sam andLila to lunch. Leaving Weller’s is unthinkable to Sorensen because“there is the challenge of new information for your mind everyday.” Thatstability is what Tony vacation and sick leave, bus passes, discounts on books and the pleasure of working with some fairly unique people. Like Wallace Stegner, Fawn Brodie, Pearl Baker — few of the literary celebs LaRae So- Weller focuses on whenhiring. Stability, knowledge and humility. “There are a lot of smart people — well-educated people rensen relished meeting dur- who make crummybooksellers ing her 30-year stint at Weller’s. Sorensen was running the popcorn machine at the old Woolworths, across the street from Weller’s, when Sam Weller convinced her to come to work for him. She met her husband, Mark Sorensen, at 3.46 * Money Market Deposit Accounts, because of their inability to confronttheir own ignorance,” Weller said. “People who cannot admit they don’t know things do not belongin the book businesses. When I hire a person, I look for humility as much as knowledge.” This week 1.48% 1.09% 1.47% 1.40% 1.39% 1.34% 1.22% 1.26% 1.38% 1.28% 1.33% 0.86% 1.10% 1.43% 1.52% 1.21% 1.22% Last week 150% 1.10% 148% 141% 1.39% 1.35% 1.23% 1.27% 1.39% 127% 1.32% 0.87% 1.11% 144% 1.52% 1.21% 1.19% 6 mos. 1.68% 1.30% 181% 1.62% 1.51% 1.49% 1.38% 1.34% 1.45% 1.56% 1.56% 0.94% 1.35% 1.67% 1.77% 1.34% 1.14% Gannett News Service Bruce Christensen, who sees books “as more than commodities to be sold,” fits the profile. His most memorable moment in 24 years at Weller's was the day a mother brought her young soninto the store to buy a book on which he would do areport. The problem Mom faced was that the child hated to read. Christensen recommended the boy read A Day No Pigs Would Die, the teenage melodrama by Robert Peck. “She [the mother] came backin later andsaid hereadit within three hours. He wouldn't evenstop toeat,”said Christensen. “When you can have an influence on people’s lives like that. .. 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