In Howard Marks latest memo, Time for Thinking, he makes the following observation: Lower interest rates increase the discounted present value of future cash flows and reduce the a priori return demanded from every investment. In layman’s terms, when the fed funds rate is zero, 6% bonds look like a giveaway, so buyers bid them up until they yield less (thus I believe 97% of outstanding bonds yield less than… Read More
Is this the last hurrah for bonds?
Recently, I have written quite a bit about the long-term return expectations for investing in bonds. See here, here, here and here. Spoiler alert: I don’t think it’s good. But long-term bonds this year have been quite an amazing story as the COVID pandemic has caused the Fed to take historically monumental actions. As a result, we’ve watched long-term Treasuries tear the roof off the market. For instance, a 20+… Read More
Why Study Market History?
While I am personally not an advocate of active investing, I follow the writing of many active managers. There are a few who have both a wonderful way with the written word and a track record to boot. Bill Miller of Miller Value Partners is one of them. I wanted to both make you aware of his work and point out a few insightful excerpts from his most recent 2Q… Read More
Where do we go from here?
I have said before that the primary goal of successful retirement income investing isn’t growth OR income, but growth OF income. For people who are nearing retirement today, as we look over the horizon toward the thirty years that lie ahead, we must ask the question: Is it time to rethink the conventional wisdom of decades past? Historically, the popular answer for providing retirement income (though not necessarily the correct… Read More
Perceived Safety of Bonds
Imagine standing in the middle of a field as a thunderstorm starts to roll through. About 50 yards away is a tall solitary tree. As someone who grew up in farming country, we grew up knowing that standing underneath the tree is the absolute worst thing we could do, even if it feels safer. The smart thing to do is to make yourself as small as possible by laying down… Read More
