Simplify, simplify.

Portfolios evolve over time.  You buy a little of this and sell a little of that and if you are not careful, you end up with a portfolio that perhaps does not look like what you set out to create.

In my case, I have fallen too much in love with the idea of shorting the 10yr treasuries.  I stand firm with my idea that government bond yields are too low to be interesting investments, BUT, that is different from saying they are going to go up any time soon.  I am a firm believer that we are in a slow growth environment for a long time to come.  The Fed has told us they will be keeping rates low for the foreseeable future (2014 is well beyond my foresight, anyway).  We have high unemployment and overcapacity in the manufacturing sector.  It will take time for our workforce to "retrain" into the high tech sector that the U.S. will thrive in later on down the road.  I have no doubt the U.S. will get there.  Other countries are making outstanding improvements, but ultimately, this is still the country that provides the safest and best opportunity for bright people.

In the meantime, there is no evidence to suggest that rates are going to go up anytime soon.  QEx is NOT dead.  The Fed will continue to prime the pump on weak news.  In addition,  the turmoil in Europe will cause shocks that will push our bonds higher.

So, I maintain that while in the long run I see bond yields going up, I do not see them going up in the next 6-12 months, so I am reducing my short position in the 10 year area.

That said, I do believe that rates are too low to compensate for risk.  Government bonds will have a place in a portfolio as a method to reduce portfolio risk and for that purpose I have long term T.I.P.S.  (All the pump priming will eventually lead to some inflation so everyone needs some protection. Stocks will provide some protection as well).  But, aside from T.I.P.S, I can't see owning 10year bonds at 1.9% being a great investment.  Nor do I see corporate bonds at 4% as a great buy when you can build a high quality dividend paying stock portfolio yielding over 3%.  I think high yield bonds can be another story and do provide some protection if rates go higher, so I will keep my (smallish) position in them.

Selling the high grade corporate bonds(LQD and CSJ) will raise cash that I can use to purchase stocks on dips.