At what point will stock investors give up and instead invest in bonds? How high can bond rates rise before company financing costs begin to hurt profitability? Those are the questions Philip Coggan examines here in the Financial Times, writing: The year has not started well for equity markets. Fears of inflation and tighter monetary policy are weighing on share prices as tensions between Russia and Ukraine darken the outlook. There is a sense that government bond yields, after declining for 40 years, might be trending upwards again. There are three reasons why this can be bad news for … [Read more...]
Young Research & Publishing has been providing research and insights on bonds to institutional investors, corporate financial officers, business owners, and individual investors for over four decades. Richard C. Young started Young Research & Publishing in the 70s to publish the authoritative Young’s World Money Forecast, a 50-page monthly investment report for institutional land high net worth investors. Today, our research on bonds is geared toward investors in or nearing retirement who are looking to preserve and protect wealth.
Yes, Money Can Buy You Happiness Here’s How
Yes, money can buy you happiness. How? By working for it. Not wishing and hoping the market does it for you. Your most productive asset is yourself. Think about the market as a way to keep what you’ve made. You work too hard for your money to lose it. And when you consider how important your money is to your family’s freedom, you can't afford to take risks. Listen, I’m the weatherman, not the weather. When T-Bills blow around like dust bunnies on a wood floor, you need to invest accordingly. Who else do you know that’s writing to you about this? You know I’m Your Survival Guy, not someone … [Read more...]
Why You AWLAYS Need This in Your Portfolio
Your Survival Guy wants you to understand that you own bonds so you can invest in stocks. As the late, great, Ben Graham explained about portfolio allocation, investors need to fall within a 70-30 mix of stocks and bonds, or vice versa. In other words, even the most aggressive stock jocks need to have some bonds as an anchor to windward. You might be shocked at how much of a cushion having just 30% in bonds can provide for a portfolio in a market decline. But check out Your Survival Guy's Deadliest Markets This Century for proof. And for the most conservative, or wealthy among us, … [Read more...]
BOND BLOWUP? Don’t Lend Your Money to Blue States
OK, blue-states are drowning in pension debt that may or may not be paid—think Illinois. And yet these cities and states are issuing more debt in the form of municipal bonds. Is that good or bad for investors? Last year the S&P Municipal Bond Index was up 1.76%, but when you dig into the guts of it, there are plenty of reasons, at least for me, to be concerned. Number one on my list is the average duration of the fund—with its 212,627 constituents—is 12.13 years. This isn’t covered in the article I quote below, but it’s a major factor in the fund’s future performance if interest rates … [Read more...]
SQUARE PEG, ROUND HOLE: Are ETFs and Muni Bonds a Good Match?
There are some asset classes that lend themselves well to the high liquidity world of ETFs, and some that don't. The municipal bond market is not a very liquid part of the investing universe. The mismatch between ETFs' super liquidity and munis' lack thereof could be a problem in the future. Heather Gillers reports in The Wall Street Journal: Investors this year spent record amounts of cash buying shares in all types of ETFs, baskets of securities that trade as easily as stocks and typically track indexes. They are drawn to muni ETFs for their easy access to tax-exempt yield at low cost under … [Read more...]
Your Job as an Investor Is Not What You Think
I hear it all the time. “I don’t understand bonds.” So I’m going to clear that up for you. But first, let me just say, it’s a real disservice to successful Americans like you to be told, ad nauseam, that we’re in a “bond bubble of epic proportions.” Listen, I want you to be a calm, cool, and collected investor, not a mad man. Talking stocks is a holiday tradition. But the reason you own bonds—wait for it—is so you can own stocks. That’s it. Period. End of story. That’s all you need to know to understand bonds. Look, the stock market discounts everyone’s best and worst ideas. Putting your … [Read more...]
Meet the Tony Soprano of Your Portfolio
"I like people who don't need everyone to like them." -Tony Soprano, 'The Sopranos'. There’s been some yappin’ lately about bonds. Why own bonds when yields are so low? Let me explain. In times of trouble, look at who gets paid first, and you realize why bonds tend to do fine when the stock market falls apart. Look how Treasuries saved portfolios earlier this century. When you invest your cold hard cash, you’re lending your money to the street, if you will. Think about your bond money like it’s Tony Soprano. Do you think Tony liked it when he wasn’t paid? Does anybody? No. But … [Read more...]
Do Investors Even Remember Risk?
The Financial Times headline by Robin Wigglesworth reads "Low yields have left investors numb to risk, bond veteran Dan Fuss says." That assumes investors even remember that risk exists, which oftentimes seems to not be the case. They may have forgotten altogether. Wigglesworth reports: The strong rally in corporate debt markets triggered by a flood of central bank stimulus is spooking veteran bond investor Dan Fuss, who warns that investors are taking the most risks he has seen in the past six decades. Central banks last year sharply cut interest rates and unleashed vast bond-buying … [Read more...]
Why Bond Mutual Funds and ETFs No Longer Work
OK, third-quarter report cards are in, and investors want to know how they did. But perhaps just as important, they want to know the WHY behind the performance. When it comes to mutual funds and ETFs, there’s a better way to go, especially when it comes to choppy markets, which have been tough as of late. Why are bond prices down? Because interest rates have risen just a tiny bit, and bond prices move in the opposite direction of rates. Over the quarter, especially the last few weeks or so, interest rates have risen enough to lower prices for bonds this quarter. But we’re talking about a … [Read more...]
REPORT: Hidden Risk in Bond Funds?
A new report suggests there is often hidden risk U.S. bond funds that isn't being represented by their classification. Robin Wigglesworth reports in the Financial Times: Would a rose by any other name smell as sweet? It is a question many bond investors should be asking themselves and the managers of their money. A bombshell paper that has been gradually wending its way through the peer-reviewed academic publishing process has now finally appeared in the latest edition of the venerable Journal of Finance, and deserves a wide airing. Sifting through the individual reported investments of … [Read more...]
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