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Fixed-income investors in a jam

By Sheyna Steiner · Bankrate.com
Tuesday, November 2, 2010
Posted: 2 pm ET

The sky is falling. Or, at least, the sky in bond-land may be falling.

Or maybe not -- but according to Paul Farrell at Marketwatch.com, if you ask the Oracle of Omaha, Warren Buffett, or economist Marc Faber, now is not the time to be bullish on bonds.

In "Sell bonds now, Fed's QE2 is doomed to fail," Farrell points out that the two prognosticators, Buffett and Faber, recommend selling bonds rather than buying them at this point.

That sentiment isn't coming out of left field either. At least a couple investment advisors I've spoken with in the past month or two have said, "I'm a fixed-income guy, but even I'm favoring equities right now."

Unfortunately the people who need fixed-income investments to live, such as retirees, are getting trampled, and the beatings will continue with more easing from the Fed.

In a blog post last week, "Fed action may hurt more than help," Greg McBride offers a succinct explanation on why the move will hurt savers and may not help anyone.

He writes:

This also hurts savers in two ways. It keeps rates on income-producing investments such as money markets, savings accounts, certificates of deposit and bonds at ultra-low levels for some time to come. And if inflation is the end result, who does that hurt the most?

That seems to be the long and short of it. When you get down to what us "folks" are experiencing on Main Street, the Fed policies are punishing consumers for trying to do what the government can't or won't: deleverage and manage money responsibly.

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