Warren Buffett, Bill Gross and UK fund stars including Jim Leaviss have seen their warnings on US treasuries proved right as S&P downgraded its outlook for US credit.
Legendary investors Buffett and Gross have stood firm against the tide of money pouring into US treasuries following the Japanese earthquake, having warned repeatedly the US economy is in dire straits.
PIMCO's Gross, manager of the world's biggest bond fund, sold all his treasuries last month after questioning exactly who would buy the securities when the Fed stops QE in June.
Meanwhile Buffett, one of the richest men on the planet, has been warning about a bubble in government bonds for the last few years.
He said back in 2009 investors were making a costly mistake snapping up treasuries that yielded next to nothing.
Today the duo, alongside home grown stars including M&G's very own bond specialist Jim Leaviss, were vindicated for their pessisim after ratings agency S&P slashed its outlook for the US from stable to negative.
The move, a precursor to a potential downgrade of the US' prized AAA credit rating and the first time it has been negative since 1941, sent markets worldwide into freefall.
But should we be surprised? Leaviss warned just last week a cut is long overdue, while OMAM's Stewart Cowley said in February he had sold out of treasuries because investors' tolerance for bad news would only stretch so far.
As Cowley put it, the US has been borrowing other people's money in order to fund its economic recovery, and there comes a time when people will demand more bang for their buck than the US has delivered.
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