I think what RunningMan is really trying to show is that even with bonds being considered a poor investment vehicle during inflation, historically they do have some inflation-defeating abilities.
I dont think anyone has ever debated that bonds produce a return in excess of inflation. I think whats been suggested is that someone trying to live off a fixed income only portfolio and taking a reasonable 3-4% withdrawal will find their purchasing power fade over time. If you can manage getting by on a sub 2% withdrawal, then an all fixed income strategy works.
Right now the yields are incredibly low, but if you DO see years of 8-10% inflation, I would soon expect years of 10-12% federal funds rate, which would be graet yields and then as inflation comes down they will cut rates boosting up the prices even more. In other words, I think that the performances heading forward for bonds will be in between what the landscape is now and what it had been in the early 80s.
No doubt. But how does that work in an investment strategy? Buying today you'd have a bunch of low yielding bonds which you'd have to sell in order to buy the newer higher yield bonds. Except you'd sell for a lower bond price proportional to the differential in rates for roughly the same YTM.
Do you sit in cash waiting for lightning to strike and buy then?
At what point in the process of waiting while inflation and rates fly up do you bite the bullet and buy in?
You could ladder the bonds, but then you'd be taking a lower yield for a large portion of your portfolio and that would probably dip you below the inflation threshold. Unless I'm mistaken the proposal here is to buy 30 year bonds and then sit tight.
Its not really that much different from any other sort of market timing.
All that having been said, my dad got burned in the stock market in the early 70's and ended up never owning equities again. He plowed his money into 30 year treasuries that paid an average of 8% and has made a nice retirement out of it. Paid off his house and lives off of about 20k a year. He did have a pretty good stash put away.
Right now he's 75, in very good health, and has about 250k worth of those bonds left. Most have either just matured or will soon. Now what?