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Since the stock market bottom in March 2009, the S&P 500 Index has almost doubled. That’s a gain of apprx. 100% in three years. Yet investors have been dumping stock mutual funds like they’re the plague over this same period. It is impossible to know where the millions of investors that have redeemed from stock funds over the last several years put all of their money, but it is clear that a lot of it went into bond mutual funds.

Over the past several years, we have seen a stampede into bond funds, and especially US Treasury bonds funds. Investors around the world are seeking the perceived safety of US bonds. Many probably don't realize that bonds can be just as volatile as stocks, and sometimes more so. When interest rates do move higher, bond investors will experience losses - how severe we don't know.

The Fed says it's committed to keeping short-term rates interest rates low through late 2014. Yet with the yield on the benchmark 10-year Treasury Note now below 2%, it is hard to see rates moving much lower. If you are overweight in bonds, now may be a good time to take some profits and lighten up. We have a professionally managed bond program which can invest either long or short, in addition to the convertible bond program offered by Wellesley Investment Advisors.

At the end of today's letter, I'll show you a brand new presidential election poll from Rasmussen that is very surprising, at least to me. Rasmussen did a poll with a three-man race - Obama, Romney and Ron Paul as an Independent - and guess who wins by a comfortable margin? You may be as surprised as I was.

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The Fed left interest rates unchanged at 2% at the FOMC meeting last week, despite warnings in the media that rates would be increased. To the contrary, I have argued that the Fed will leave rates unchanged all year, and the FOMC policy statement last week supports that view. There are indications that inflation will moderate later this year, which will take pressure off the Fed to raise rates. Next, we turn our eyes to the stock market and ponder whether we are looking at a continued sideways market for several more years. If so, this will be bad news for millions of Baby Boomers that have not saved enough. Maybe it's time they consider something different, such as the investment programs I recommend....

The conventional wisdom on Wall Street seems to be that we have now entered into a recession. While I'm not yet ready to get on that bandwagon, I do see it as a definite possibility in light of ongoing weak economic reports. If we do experience a recession, the next question is whether this is going to be the "big one," somewhat akin to the 1930s Depression....