From Junkster's linked article: "The yield on the two-year note, which rises when bond prices fall, dropped to 0.537% during today’s market action."
Folks, that's before your short term bond fund takes its cut (the ER). So, that "safe" investment's going to earn you essentially nothing. OK - Should Armageddon occur within 2 years, prices might spike higher.

I like QUAL. Good concept. Great low fee. Volume still on light side, despite $500M AUM. So, use stops to help prevent getting stung by spread.

@Charles, how do you distinguish a bid-ask spread from a premium-discount to NAV?
Which of those 2 are you trying to minimize?

1. Fannie Mae up 4.36%
2. Sears up 1.02%
3. St. Joe up .95%

http://blogs.barrons.com/incomeinvesting/2014/09/23/strong-two-year-auction-draws-foreign-interest/?mod=BOL_hp_blog_ii
Super strong bidding today for 2 year notes at 0.589%, primarily from foreign central banks.

I like QUAL. Good concept. Great low fee. Volume still on light side, despite $500M AUM. So, use stops to help prevent getting stung by spread.

Well, as usual, I just shot my mouth off without worrying too much about the actual numbers, so when I looked into it, I was happy to see that I was correct.

@dryflower, Morningstar just came out with an article on the subject.
http://news.morningstar.com/articlenet/article.aspx?id=665790
When Will Quality Bounce Back?

These funds' lackluster recent performance doesn't tell the whole story.
"Left behind the past few years have been many funds focusing on "quality" stocks, generally defined as those that are highly profitable, generate a lot of cash, and have strong balance sheets"

In the below linked article Bespoke Investment Group provides their take on the major indexes; and, will the S&P 500 Index follow the others?
http://www.bespokeinvest.com/thinkbig/2014/9/22/dropping-like-flies.html

I think if you wanted you could use the historical information from the Fed to graph or create a table of what has historically happened to 10 Years when the Fed Funds rate changes, or pretty much any other comparison you'd want to do.
federalreserve.gov/releases/h15/data.htm
If you do that I'm sure lots of people, including myself would love to see the graph :)
The following link shows the history for the Fed's target for rates. To my surprise when rates have gone up historically they've gone up pretty quickly.
newyorkfed.org/markets/statistics/dlyrates/fedrate.html

Great resources from the Fed, LLJB. Thanks for posting that.
The historical Fed Funds rate was very interesting. Last month is shows the Fed Funds rate was 0.09%. In June 1981 it was 19.1%. That gives plenty of information for interest rate and bond market forecasters to work on.
You're right, it would be very instructive to compare changes in the Fed Funds rate with what happened to the 10-year bond. Or just a comparison between the Fed Funds rate and the 10-year Treasury. Hmmm....maybe Charles would love to sink his teeth into that data.

I'll call BS. I do not see rates at 3.75 by end of 2017.

I agree with this.
Lets say they start raising in June 2015. That would mean 2.5 years to run it up to 3.75. The economy would have to be doing very well for that to happen.

I agree with you Dex. The economy would have to be doing very well for that to happen. But we are talking bonds, not stocks. Yeah, the economy doing very well would be great for stocks, and I hope that's exactly what happens. And in the scenario you mention, "2.5 years to run it up to 3.75", bonds would tank big time. Certainly the U.S. Aggregate Bond Market Index. In that scenario, junk bonds probably do OK. And corporates much better than Treasuries.
Personally, I have no forecast for interest rates, the bond market or the stock market. I'll leave the forecasting to others.

I'll call BS. I do not see rates at 3.75 by end of 2017.

I agree with this.
Lets say they start raising in June 2015. That would mean 2.5 years to run it up to 3.75. The economy would have to be doing very well for that to happen.

I believe, although I couldn't find the details again of what I've read, that two of the most hawkish members of the Fed, Fisher and Plosser, will rotate off as voters next year. This should make the Fed more dovish on balance. At the same time, Yellen has shown herself to be pretty dovish so far and to the extent that history provides any evidence, the Fed's chairperson usually gets what they want even though there's a committee that "votes" on whatever the Fed does. At the press conference after the meeting finished Yellen commented on the "Dot Plot" specifically and my interpretation was that she essentially said it just reflects each member's expectations about a future that hasn't happened yet and it doesn't tell you anything about how much confidence each member has in their own projections.
In terms of what happens when the Fed raises rates, in theory at least, the longer the term the less the rate should adjust. That's because what people believe about the next 10 years shouldn't have a 1:1 relationship with what happens today (although admittedly it does sometimes) and because future rates should already discount what's expected for the future.
I think if you wanted you could use the historical information from the Fed to graph or create a table of what has historically happened to 10 Years when the Fed Funds rate changes, or pretty much any other comparison you'd want to do.
federalreserve.gov/releases/h15/data.htm
If you do that I'm sure lots of people, including myself would love to see the graph :)
The following link shows the history for the Fed's target for rates. To my surprise when rates have gone up historically they've gone up pretty quickly.
newyorkfed.org/markets/statistics/dlyrates/fedrate.html

I'll call BS. I do not see rates at 3.75 by end of 2017.
"the Fed just said last week that this is what they expect to do! "
And how many times has one Fed governor said one thing only to have another Fed governor say the opposite a few days later? How many times have they changed their forecasts? How many times have they moved the goalposts?
Go about your business and invest in a way that is appropriate for you. This whole situation with what the Fed is doing and analyzing whether or not a couple of words ("considerable time") were the same on the last Fed statement has really brought this whole thing into a new realm of utter ridiculousness. (Yellen: "No mechanical interpretation of "considerable time" - in other words "it depends on what your definition of is is".)
Edited to add, and sure enough...."http://headlines.ransquawk.com/headlines/fed-s-kocherlakota-says-should-be-very-cautious-about-starting-to-raise-rates-with-inflation-so-low-23-09-2014"

@JohnChisum, the bond fund you went into has a manager that is actively doing things to prepare. A lot of bond funds never do that, because by prospectus they have to stay pretty close to an index, like the total bond market index, which is based on the "Barclays Capital U.S. Aggregate Float Adjusted Index, a broad proxy for the investment-grade U.S. bond market", according to M*.
There seem to be two big IFs:
1. Will the Federal Reserve actually raise rates 3.75% by the end of 2017?
2. What will happen to longer term interest rates, such as the 10-year Treasury rate?
PIMCO doesn't believe the Fed will go that high. Bill Gross and company believe there will be a "New Neutral" rate of 2%, not the old standard of close to 4%, which apparently the Fed still believes in.
But look, the Fed just said last week that this is what they expect to do! And they told the whole world. We'll see who turns out to be correct, the Fed or PIMCO.
With regards to your question about "will bond funds perform better than equity funds in this same climate", I have no idea. I've read that stocks have not reacted nearly as badly as bonds to the initial volley of interest rate hikes. But who knows if the past historical patterns will repeat themselves.

John, the Fed also says they will raise rates in 2015....2016....and 2017. So it would be a steady raising of rates once they start. If it happens, and if the longer term rates follow suit, most bond funds are in trouble. The expected raise in 2015 would be to 1.25%, from the current rate of 0% to .25%. Even with that modest rise, the total bond market index would go down 5.7% in NAV, add in the 1.99% income for a total return of -3.7%. Again assuming that the longer term rates follow suit with what the Fed does.

Last week, the Federal Reserve released its "Dot Plot", which is a plot of what each member of the FOMC thinks the Fed Funds interest rate will be. They think they will have raised interest rates 3.75% by the end of 2017. That's a lot, and it has big implications for bond funds. The big question: if they raise rates 3.75%, how much will the 10-year Treasury yield rise? Will it also go up 3.75% from where it is now, which is 2.57%? IF it does (admittedly a very big IF), we are going to see some big drops in the NAV of bond funds. Take the Total Bond Market Index Fund (VBMFX). It has a Duration of 5.7 years. For every 1% increase in the corresponding interest rates of the bonds in the fund, the NAV is expected to drop 5.7%. IF the yield on the bonds in the fund goes up 3.75% over 3 years, we could see a 3.75 x 5.7 = 21.4% drop in the price of the fund. Add in the yield to get the total return. The current SEC yield is 1.99%. With a rise in rates/bond yields, the bond fund SEC yield will rise, but since the average bond in the Total Bond Market Fund has a maturity of 7.8 years, it should take a long time to clear those bonds out of the fund for the yield to rise enough to significantly offset the NAV drop. Not a pretty scenario for the bond market.
Your comments please!
http://blogs.marketwatch.com/capitolreport/2014/09/17/dot-plot-shows-fed-will-be-quick-about-raising-rates-once-it-starts/?mod=MW_story_top_stories

In case you're wondering what changed, Vanguard loosened the restrictions. You used to be limited to $25K per SSN (across all accounts); it's now $25K per account.
New wording: Current PRIMECAP Fund shareholders may invest up to $25,000 per Fund account per year in the Fund
Old wording: Current PRIMECAP Fund shareholders may invest up to $25,000 per year in the Fund. The $25,000 limit includes the total amount invested during any calendar year in each Fund account registered to the same primary Social Security or taxpayer identification number

Vanguard PRIMECAP Core Fund
http://www.sec.gov/Archives/edgar/data/826473/000093247114006730/ps1220a092014blue.htm
Vanguard Capital Opportunity Fund
http://www.sec.gov/Archives/edgar/data/932471/000093247114006729/capitalopportunityps11109201.htm
Vanguard PRIMECAP Fund
http://www.sec.gov/Archives/edgar/data/752177/000093247114006728/ps59a092014blue.htm
Here is one of the filings as an example:
Vanguard PRIMECAP Fund
Supplement to the Prospectus and Summary Prospectus
Important Changes to Vanguard PRIMECAP Fund
New or current Vanguard PRIMECAP Fund shareholders may not open new accounts or contribute to existing Fund accounts, except as described in this supplement. Clients enrolled in Vanguard Flagship Services® or Vanguard Asset Management Services™ may open new Fund accounts, investing up to $25,000 per Fund account per year as described in this supplement, in individual, joint, and/or personal trust registrations. There is no specific time frame for when the Fund might reopen for new account registrations by other Vanguard clients, or increase investment limitations.
Limits on Additional Investments
Current PRIMECAP Fund shareholders may invest up to $25,000 per Fund account per year in the Fund. The $25,000 limit includes the total amount invested during any calendar year in each Fund account. Dividend and capital gains reinvestments do not count toward the $25,000 annual limit. Participants in certain qualified retirement plans may continue to invest in accordance with the terms of their plans. Certain qualifying asset allocation programs may continue to operate in accordance with the program terms.
The Fund may modify these transaction policies at any time and without prior notice to shareholders. You may call Vanguard for more detailed information about the Fund’s transaction policies. Participants in employer-sponsored plans may call Vanguard Participant Services at 800-523-1188. Investors in nonretirement accounts and IRAs may call Vanguard’s Investor Information Department at 800-662-7447.
© 2014 The Vanguard Group, Inc. All rights reserved.
Vanguard Marketing Corporation, Distributor.
PS 59A 092014

Until a few month ago I paid little attention to these funds. Since then I researched some especially Arnott and the RAFI fundamental index, in particular the offering from Schwab. FNDF. It's on my watch list.
Having more choices is always better.

I'm in the same boat as you here John. We have ended up in the same place. I heard Rob Arnott give a webinar on "smart beta" and the RAFI, and it was very appealing, the idea of getting the price out of the weighting scheme. It's certainly an intriguing idea, possibly worth it. Professor Jeremy Siegel is also big on an alternative way to weight indexes. He's the advisor to the Wisdom Tree family. He's apparently big on dividend weighting. It all sounds very interesting. One thing is that the expense ratios are higher on these alternative methods of weighting and selection of the index. VTI only costs 5 basis points, .05%. A big issue is that if you are already invested, you have to sell things and pay capital gains taxes to re-invest in a "smart beta" index. We should take a look at performance of the RAFI funds vs. VTI and the traditional cap weighted index funds.

Would like to see SHLD stop falling.
Can't wait until earnings season.
Suspect it will be pretty good, given the vibrancy across nation this summer.
M* says I'm US Eq 50/EM 10/US Bond 10/Cash 30, shorts factored in.

"I don't care what HIS opinions are on index funds or how he handles investment costs, but when he directs his nonsensical 2nd hand information in my direction, I feel obligated to give him the "Facts"!"
Tampabay,
1. Being you do not care what MJG has to offer, and it happens to be a whole bunch, why are you reading his posts?
2. Being you do not care, why are you even on MFO? To talk about yourself?
3. "nonsensical 2nd hand information"? Huh?!?!
4. " I feel obligated to give him the "Facts"!" Who are you?!?!
5. Regarding your comment to me, no, I do not know your portfolio. From another board, which you are persona non grata, I know your " Stock Sector| Holdings Detail Vs. the S&P (per Morningstar)". I asked you "Would you be so kind to share your portfolio with us?" Possibly you should care what MJG says, so you can learn the difference.
Good luck with your "portfolio".
Mona