Treasuries Beating U.S. Assets Vindicate Bernanke
Source: Bloomberg - September 8, 2008
September 2008

SCM Advisors' Chief Strategist Maxwell Bublitz was quoted extensively in an article by Sandra Hernandez and Daniel Kruger on his correct assessment of the recent strength of Treasuries.

Quoted from Bloomberg:

Maxwell Bublitz got a lot of grief when he said Treasuries would rebound from the worst bear market in four years as inflation abated and economic growth slowed.

``People over the last five months have been saying, `you're out of your mind,''' said Bublitz, 53, who oversees $3.5 billion in fixed-income assets as the chief strategist at San Francisco-based SCM Advisors
LLC.

While Bublitz predicted on June 25 that two-year notes would gain, Bill Gross of Pacific Investment Management Co., Colin Lundgren at RiverSource Institutional Advisors, and Thomas Atteberry of First Pacific Advisors, who together run about $1 trillion, said the slump would worsen. They cited surging commodity prices and the minimal assurance offered by Federal Reserve Chairman Ben S. Bernanke that
inflation would slow.

Instead, U.S. debt of all maturities returned 2.6 percent since June 30 as crude oil tumbled 26 percent from a record and the credit crisis that followed the collapse of the subprime- mortgage market entered its second year. So far this quarter, Treasuries beat the returns of 2 percent on debt sold by AAA- rated corporations and the 1.7 percent gain on government- sponsored agencies, according to indexes compiled by Merrill Lynch & Co. The Standard & Poor's 500 Index slumped 2.5 percent in the same period.

The rebound provides some vindication for Bernanke, who cut the Fed's target rate for overnight loans seven times to 2 percent to keep the economy growing even as commodities had their best first half in 35 years and the inflation rate soared to a 17-year high. Bublitz says tumbling oil prices, a slumping housing market and $507.1 billion in credit-related losses will send two-year yields to 2 percent within two months.'

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