Originally Posted by utrecht
I believe I have an age appropriate amount of my assets invested in bonds, but I have to admit that I don't understand them at all which bothers me. I read both of those articles and have no idea if they are inferring that bonds are about to implode and I should run for the hills (if i was a market timer) or if the managers are being smart by attempting to reduce exposure by holding more cash while trying to boost returns by investing in riskier arenas, which in my opinion could be a smart move.
My take is a bit of both. Bill Gross, a guy from the rating agency side of S&P, and two sharp (or at least they seem to me) woman journalist from the Economist and Financial Times were on Charlie Rose last week.
One of the takeaways I got from their interesting conversation was that a lot of conventional wisdom is being turned on its head. In particular in the old days risk that an emerging countries sovereign debt would default or (I guess the new term is being restructure ala Greece) is much higher than US or Europe. Now days the balance sheets of a China, Brazil, India look sounder than most developed countries, and their growth prospects look vastly better.
Likewise, corporate debt is traditionally viewed as riskier than government debt, but that is changing. I and more importantly professional managers are looking at the corporate and saying, who do I trust more to pay back my bond in 20 years Johnson & Johnson, Exxon or Uncle Sam, Royal Dutch Shell Oil, or Holland, Toyota or Japan, Siemens or Germany.
Anybody who claims certainty in investing in these challenging times is either a liar or a fool, or likely both.