Remedial investing

Seriously, what is wrong with you people?


Independent Accountant said...


Well said. Here I go again: Got gold? Get more! Got bonds? Sell immediately.


K T Cat said...

Q: Does that chart include Fed purchases?

Thought: That may not be a vote of confidence in bonds, but a panic vote against stocks.

K T Cat said...


W.C. Varones said...

Thanks for the link!

That chart is only mutual funds, so it's essentially all small investors. The Fed doesn't buy mutual funds (yet!).

There is definitely some stock aversion here, but if you're averse to stocks, I'd say buying just about anything: real estate, gold, energy MLPs, commodity funds, short-term CDs, etc., is a better way to protect your purchasing power than very-low-yielding bonds in an era of global competitive devaluation.

RT Pro-America said...


I think you need to include "US Government" before bonds in your rants. Foreign bonds, corporate bonds (both investment-grade and junk), and munis are still a decent investment and, while more volatile than treasuries, are still a shelter against the risk and volatility of stocks, especially for those searching for "guaranteed" income in times when wages are low or non-existant (see real unemployment figures IE official + non claiming + under employed). Plus munis provide a pretty nice tax advantage on state and federal levels and are relatively safe as long as you aren't buying bonds for cities like say... Detroit.

Personally I'm a little heavier weighted in stocks than the traditional rule would suggest for good reason. My point is that when you are a big shot fund manager like yourself, it's probably not the soundest advice to say "all bonds are shit overload in stocks and gold". But then again I guess that is exactly the stance people want in a stock/gold/Zombie Apocalypse fund manager.

W.C. Varones said...

Volatility is not risk.

Stocks are volatile.

Bonds are risky.

RT Pro-America said...

Touche. There is much truth in that, perhaps my argument was not worded perfectly and for that I apologize. Stocks are volatile while bonds are not. That is a true statement, either can be risky. In any case I still feel there is a need for both in the average investors portfolio. And my point was people are chasing income elsewhere when wages aren't delivering, and sure perhaps better decisions could be made, but most people don't know any better. Bonds are always less RISKY than stocks by definition. IE if you hold coporate bonds for company A and stock for company A, if company A goes bankrupt bondholders get paid whatever they can recoup in asset selloffs where shareholders get the big middle finger with an apology letter. But I digress and you know all this already.

On a different note, did you just counter a statement made about your opinion with a link to an older blog post containing mostly your opinion? At this point I concede as reason has left the building long ago.


W.C. Varones said...

Reason has left the building? Are you kidding me? Reason is just getting warmed up.

When you discuss "risk" in a corporate bond vs. that same corporate stock, you are narrowly considering only the legal risk of getting your contracted cash flows. In that narrow sense, yes, bonds have legal priority over stocks, and coupons will be paid before dividends.

But real-world investors are not concerned only with default risk. If your only future liability were a fixed, non-inflation-indexed series of payments (e.g. a fixed-rate mortgage), you could use that narrow definition of risk. But real-world investors do not have only fixed, finite liabilities. Most of real-world investors' future liabilities are sensitive to inflation.

So the bond is relatively guaranteed to pay you a fixed series of coupons which are relatively guaranteed to decline in purchasing power. Stocks, meanwhile, generally have growing earnings and dividends, and many assets of the company appreciate with inflation.

In terms of preserving purchasing power, then, bonds are highly risky, especially in a time of low yields and irresponsible fiscal and monetary policy, while stocks are less risky.

As for the "gold bubble," I've never seen a bubble before in which so few people had any significant portion of their wealth in the "bubble" asset. Think about it: how many people do you know who have even 5% of their retirement accounts or net worth in gold now? Tech stocks in 1999? Houses in 2006? Quite a different answer, isn't it?

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