Whereas 10 year Gilts offered a 10% yield back in 1992, now they yield less than 2% - and the government has more need to issue them than ever before. What kind of idiot would be buying them here? Answer: pension funds. As the FT reported last Thursday,

"UK pension funds are holding more bonds than equities for the first time since the so-called cult of equity in the 1950s.."

To be fair to the pension funds, their own stupidity at crowding into bonds at their most expensive levels in history is only half of the story; a desperately indebted government is also doing its bit, by forcing them through the medium of "financial repression" to hold Gilts at the expense of anything more sensible. You may recall, for example, the Dutch pension fund last year that elected to try and protect the purchasing power of scheme members' capital by buying gold. The Dutch regulator tried to force them to sell their gold on the basis that it was "risky" - a definition of risk that evidently only heavily indebted governments would use. The Dutch regulator lost the case on appeal.

David Fuller's view I agree with Tim Price but in temporary defence of pension funds, they still have total return momentum on their side. However, some of us maintain that this is turning into the mother of all bubbles. Will they; can they step away in time? Every alert manager hopes to but history is not on their side. Too many of them will continue to buy on the eventual post-peak setbacks.

Please do read on in Tim Price's letter. It should certainly interest most serious investors.