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Pondering this headline which could be taken several ways. If "bust" is a noun and "to" a preposition, than no ... there's no bust that's very close at hand. If "bust" is an adjective meant to describe their value (as in "busted bond"), than no again. I don't think corporates are even close to busted status. However, if "bust" is a verb (part of the infinitive phrase "to bust"), than yes maybe - corporate bonds are probably in line to bust one of these days.
Excerpt: "The Barclays U.S. corporate investment grade bond index has returned 59% since the beginning of 2009 ... The Barclays U.S. high yield index, tracked by the SPDR Barclays High Yield Bond ETF (NAR:JNK) , has returned 146% since the beginning of 2009."
I'm sorry, heezsafe, to be so cavalier. But truth is just about every asset class has soared since global markets bottomed in March '09. Bonds, equities, real estate and gold (around $900 back than) have all benefitted mightily. So, as the old adage went: "Where's the beef?"
T.S. Eliot remarked the world would end not with a bang but a whimper. Markets sometimes behave in similar fashion. So, the sell-off in bonds could very well be gradual - perhaps only apparent when comparing future returns against other asset classes. This would be diametrically opposed to the headlined BUST. (However - an article written from this perspective likely wouldn't sell as much copy or garner Messrs. Roubini and Gundlach the attention they both so richly deserve:-)
If you are very long-term focused and diversified into bonds and other assets according to some well thought out plan, than you probably need do nothing in response to the article. (I'll assume that in that case, you also rebalance periodically by selling some of your best performers and moving more into your dogs.) However, if your time horizon is shorter, than it's probably a good time to lighten up on all risk assets, including bonds, and maintain an elevated level of cash or cash equivalents. Regards.
@hank, as long as we are overthinking these headlines what if the subject of going bust is the rally rather than the bond?
I get that you are fearful of the current levels and valuations and like most people have an aversion to loss influencing your decisions. But you really cannot time the market with a finger in the wind.
Three good options: Have a diversified portfolio that also includes beaten down or not so lofty sectors at a level of beta exposure that you are comfortable with, rebalance and stay put, outsource the downside protection to active managers that have demonstrated that capability, or learn technical analysis in some depth to do meaningful momentum/trend allocation with mental or actual stop loss limits.
If you don't have shortfall risk of your capital in your time period then what you are saying regarding some risk-off decision makes sense as a plan for the future but not as a way to time the market.
@hank Howdy hank, You noted: "However, if your time horizon is shorter, than it's probably a good time to lighten up on all risk assets, including bonds" Investment travels at this house would likely take us in the opposite direction; "if all risk assets" are going south, we would likely not sell any investment grade bonds. High yield would be an area to be watched more carefully; but not neccessarily a sell. Take care, Catch
Comments
Fer crissake, how can you be so cavalier in dismissing their concerns, hank?
I'm sorry, heezsafe, to be so cavalier. But truth is just about every asset class has soared since global markets bottomed in March '09. Bonds, equities, real estate and gold (around $900 back than) have all benefitted mightily. So, as the old adage went: "Where's the beef?"
T.S. Eliot remarked the world would end not with a bang but a whimper. Markets sometimes behave in similar fashion. So, the sell-off in bonds could very well be gradual - perhaps only apparent when comparing future returns against other asset classes. This would be diametrically opposed to the headlined BUST. (However - an article written from this perspective likely wouldn't sell as much copy or garner Messrs. Roubini and Gundlach the attention they both so richly deserve:-)
If you are very long-term focused and diversified into bonds and other assets according to some well thought out plan, than you probably need do nothing in response to the article. (I'll assume that in that case, you also rebalance periodically by selling some of your best performers and moving more into your dogs.) However, if your time horizon is shorter, than it's probably a good time to lighten up on all risk assets, including bonds, and maintain an elevated level of cash or cash equivalents. Regards.
I get that you are fearful of the current levels and valuations and like most people have an aversion to loss influencing your decisions. But you really cannot time the market with a finger in the wind.
Three good options: Have a diversified portfolio that also includes beaten down or not so lofty sectors at a level of beta exposure that you are comfortable with, rebalance and stay put, outsource the downside protection to active managers that have demonstrated that capability, or learn technical analysis in some depth to do meaningful momentum/trend allocation with mental or actual stop loss limits.
If you don't have shortfall risk of your capital in your time period then what you are saying regarding some risk-off decision makes sense as a plan for the future but not as a way to time the market.
Howdy hank,
You noted: "However, if your time horizon is shorter, than it's probably a good time to lighten up on all risk assets, including bonds"
Investment travels at this house would likely take us in the opposite direction; "if all risk assets" are going south, we would likely not sell any investment grade bonds. High yield would be an area to be watched more carefully; but not neccessarily a sell.
Take care,
Catch