Treasuries declined for the 4th consecutive month, the longest monthly decline since 1996, a sign that bond investors are betting the worst of the recession is over and inflation will result sooner than later. Two strategies to deal with this perspective involve either: 1) the purchase of higher yielding corporate or municipal bonds; or 2) buying inflation-protected Treasuries which pay a lower yield but add a multiple of inflation to the total return. The yield for 1-year Treasuries is only about .5%, for 5-year notes about 2.7%, for 10-year bonds about 3.6% and around 4.4% for 30-year bonds. Investment-grade municipals yield tax free income and are paying about .8%, 1.8%, 3.1%, and 5.1% for the same time periods. Similarly, investment-grade corporate bonds are yielding 1.5%, 2.9%, 3.9% and 5.6%. Given the passage of the stimulus package, the higher yields outside of the Treasury market are compelling.

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Real Estate For the first time since early 2007, the Case-Schiller Index of real estate prices in the 20 major cities showed prices flat to up. Sales of existing homes rose for the 3rd consecutive month and sales fo new homes rose in June by the largest amount in 8 years. That's the good news. The bad news is that foreclosures continued to flood the market creating excess supply (limiting price appreciation potential) and more than 30% of all real estate sales have been on foreclosed properties. Still, this is welcome news for owners who have seen property values decline and potential buyers who may begin to feel this is the bottom.