TYY is not a bond fund, but has a similar strategy (it’s a MLP closed-end fund), and may not have sufficient leverage coverage within their charter:
http://biz.yahoo.com/bw/081009/20081009006125.html?.v=1

And with gold… yes. The fundamentals are lined up with gold, but I’m waiting for confirmation from prices.

Deflation fears in the short term. Gold may get cheaper before it goes higher. Gold stocks are getting relatively pummeled by nature of being stocks. And that big downtrend (HUI) since March scares me.

I like the idea of gold, but don’t know if the timing is right yet. Luckily I can adjust my opinion and positions as time unfolds.

Also, for options lovers, I’d like to point people to this classic article (though probably forgotten) about reverse calendar spreads as a way to play capitulation days (not that we’ve really had a true one yet). It’s an interesting way to avoid bottom picking problems with straight buying.

http://www.investopedia.com/articles/optioninvestor/02/081902.asp

Regardless, I agree that prices are starting to make the broad indexes look more attractive. Those of us that are young will benefit from dollar cost averaging in bear markets like this.

“This is the “value trap” problem that many investors fall into. You see the market down 30% and think its a great buying opportunity.

It is a great buying opportunity only if earnings going forward can be sustained. But in this case, they cannot. It is flatly impossible; with Treasury borrowing money like a madman, tacking on more than 20% to the national debt in the space of months, carrying costs will inevitably rise as will taxes. Both of these have a multiplier effect (in the wrong direction) on corporate profits, and in addition the “faux profits” from financial engineering have all disappeared at the same time.”

About gold, is your hesitancy because you are seeing deflation as more likely than hyperinflation or do you see inflation but simply think gold will get cheaper before it gets more expensive? Or something else?

http://www.nowandfutures.com/investing.html

(The assumption is that this doesn’t include your savings fund for consumption and emergencies so that we can have a pure theoretical exercise…)

I’d be scaling into the following allocations…

20% closed-end bond funds trading at discounts
20% energy trusts and MLPs or MLP funds
20% targeted for gold and gold stocks
40% cash

I’m not eager about getting into gold or gold stocks right now, so I probably wouldn’t be scaling into those, or be scaling slowly and waiting for a trade catalyst before putting that money to work.

The 40% cash would be defensive and basically my “wait for ridiculous prices” fund. Money market rates are low, but he who loses the least in bear markets is ultimately a winner.

The bonds trading at a discount (that I wrote about separately) are on my short list of candidates, as are several of the energy trusts and MLPs that have very high yields.

When P/E ratios are fluctuating rapidly because of dramatic changes in both P and E, the actual cash flow and dividends become more important.

Ultimately, even if today (or tomorrow) marks the bottom of the bear market, I don’t think a new, vigorous bull market will be starting right away. I believe we will have lots of time, so patience is in order.