We have an entire generation of investors who have never been "weaned" off artificial interest rates. They have no clue about real interest rates. Many of them don't even know what a bond is, limiting their "knowledge and wisdom" to NFTs, crypto scams, trend chasing, paid-to-play idiots, forever fearful of falling behind their index bogies. Add in the "Robin Hood" generation of newly minted "geniuses", and you get a very toxic brew of ignorance, guiding the financial markets into a very nasty mess.
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Excerpted from: Bill Fleckenstein's “Market Rap” / Question & Answer Portion. Posted Friday, February 11 by an anonymous reader / contributor. It’s a paid subscription site and so I rarely quote from it. But I thought the above to be a particularly succinct and sobering take on bonds and today’s investment climate - whether you agree or disagree.
Comments
I personally find myself in midstream at the moment, wanting to stick to my own plan, after a fashion--- while at the same time feeling the need to adjust, without throwing the plan out the window... I don't want to lose the reduced volatility provided by bonds, but don't want the bonds to drag me down like an anchor, either. Important, I think, to keep a perspective beyond the moment. I've been slightly overweight in bonds for 2-3 years, now... That weighting has kept my (unrealized) losses so far in 2022 from matching the major stock indices. Still not too much pain.
FWIW - I checked RPSIX the other day and it seems to have held up fairly well during the recent bond selloff. Looks like RPEIX is its largest holding - a bond fund designed to counteract rising rates.
When that Ponzi scheme crashes, it will be one for the ages.
I'd like to think I'm joking but maybe not... what did munger say today... working under the assumption that long run dollar goes to zero due to inflation?
Best
Baseball Fan
SAVE FERRIS! oops, wrong town.
CLEVELAND ROCKS.
Excerpt 1: “There are people who are living in a world in which an aggressive Fed tightening—an increasing possibility here—is not an outcome they can accept, so they’re pretending it won’t happen,” said Scott Minerd, chief investment officer at the investment firm Guggenheim Partners. “The places where that’s very real—cryptocurrency, tech-related companies in private equity—could be in deep trouble.” Once there’s a sharp decline in one of those sectors, that could set off volatility in other corners of the market, he said.
Excerpt 2 “They’re saying they’re going to keep inflation in check and I believe them, but they’re suggesting not a lot of work will be necessary,”said former New York Fed President William Dudley. He believes rates will need to rise to 3% or 4%, which could damage markets. “You’re going to be a lot less popular” in that environment than the one the Fed was in during the past decade, said Mr. Dudley.
Excerpted from The Wall Street Journal (print edition) February 16, 2022
I think dry powder is alright to hold at this time. It lets me sleep like a new born baby!
As you know most investors have their own venue, so keep on trucking as the road buster's say.
Have a good week, Derf
Fred