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The case for Bonds, Why ever buy Any?

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The case for Bonds, Why ever buy Any? Empty The case for Bonds, Why ever buy Any?

Post by TruthSeeker Fri Sep 29, 2017 6:26 pm

Why should one buy bonds ever if you do not plan to hold them until maturity.


1. Bonds are manipulated by the Fed. They bought 4.5 Trillion (yes, with a T) worth since financial crisis. And with what? Money out of thin air, just ballooned their balance sheets out of thin air. Called it QE.

2. Ok, so they bought with thin-air-money, but who did they buy from? Anyone - you, me, John, whoever had it. First they started with Treasuries and then even moved on to MBS/Corporate Bonds. Fine, keep on buying, but why? Because to buy - they could inject this imaginary electronic cash on their side to real cash in our hands.

3. Now whoever sold, has real cash. But what do we do with this cash? Banks got it the most. The idea of the Fed was that banks would distribute it in the system to increase economic activity. Hey, free cash - who wants it? Now, my neighbor Mr. Chittanooga also has cash, by selling his bonds or by simply tapping the easy availability of cash. Banks dont want this cash either, they already have a lot to give out. So they give absolutely no returns to Mr. C in CDs or Savings.

4. Hmm. No one wants this cash. This $4.5 Trillion injected into the system. Or at least, no one is ready to pay anything for it.

5. Mr. C and many like him, including institutions, have no option to put it in Stocks. CEFs (Closed Ended Funds), Dividend seekers, Fin Tech companies start to pop up to entice folks seeking to deploy cash. Real Estate in some markets goes way up beyond pre-2008-crisis. With stocks being the ONLY option for average Joe, millennials keep putting money in broader markets. Experts keep on crying - Markets are overvalued, but where else?

6. Now, coming to bonds. In this whole picture, a few things become clear:

 - Feds can easily manipulate bond market
 - Conventional wisdom of bonds being the safer bet than stocks long term is complete BS. Investing in a 20-30 year bond with a coupon rate of 3% is like blocking your money for all your working life to get 3% return.
 - The whole idea of 80/20, 70/30, 60/40 split between stocks and bonds is again a complete BS. One is better off with stocks and cash split, when it comes to long term. Most people do not buy bonds until maturity, only the rich who want to protect their already high NW do. Buying bonds for a common man is totally a scandal. Short term, investment grade bonds are nothing more than parking cash, not really an investment; and that too is risky if Govt aka Fed intervenes to buy/sell these bonds in Trillions.
- I mean 20/30 year stocks are a lot less risky than bonds, for their rewards.


1. Never ever invest in 20-30 year maturity bonds.
2. Use short/investment grade bonds only as parking spots, which you can hold until maturity.
3. Bonds in general are a bad investment unless your NW is above $5M, one is better off with stocks and cash.

random bondings,


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