I know, why should you listen to yet another guy talking about bonds? Well, to paraphrase the head geek in Revenge of the Nerds when asked why he's so good in bed: I think about them a lot, and have gotten much better with practice.
I retired in September, 2008, just in time for the great recession to clobber the markets, and my investments. Even though I had raised quite a lot of cash in advance, the tsunami took me down 45% from peak to trough. The silver lining, though, was the arrival of an historic opportunity in bonds. Bonds from a wide swath of American blueblood banks were suddenly trading to yield over 10%, while lesser companies (still investment grade) were at 20% or more. This was despite that fact that the US govenment had handed the top ten banks billions of dollars, thus in effect guaranteeing their survival!
In a state of total terror, I started buying those bonds. My timing wasn't great; most of them went down further, but by April 2009, they finally started back up. Then it got easy. As their prices rose (thus lifting the value of what I'd already bought), it became much easier psychologically to buy more. Also, rising values increased the amount of money my broker was willing to lend for further purchases. Bottom line, from trough to peak (about a month ago), my gain was 130%, well above my earlier 2008 peak. Better yet, the bonds transformed a cash-poor portfolio into one whose income dwarves my social security payment.
So, I do think I have a thing or two to tell the world about bonds. Anybody interested in more?
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