U.S. Treasuries have been tarred and feathered since we said they would underperform TIPS at the beginning of the year.  But I think the market is getting a little bit ahead of itself.  Treasuries and the dollar are no doubt being devalued by our government’s reckless monetary policy, but the death of the dollar isn’t an event.  It will be a process.  In the meantime, non-correlated dollar assets have shot to the moon.  Oil is up over 100% in 3 months and stocks are up over 40% in 3 months.   With the latest inflation readings benign and Case Shiller Prices reading negative you can buy a 10 year treasury with roughly a 5% real yield.  Compared to pricy stocks (over 20 times earnings) and money market rates at 1% I think the 10 year Treasury has some staying power here.

In summary: buy American.  Bonds that is….

*Disclosure: Long U.S. Treasuries