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Of Human 'Bond'age
Old 02-09-2005, 06:26 AM   #1
 
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Of Human 'Bond'age

Back when I first retired I owned no bonds. In fact
investment-wise I was strictly CDs (like the Terhorsts
when they began) plus some real estate. This was
before I developed my 50/50 bonds and real estate
theory.

Anyway, if someone had told me when I started that I would be almost completely out of CDs and loaded with
long term bonds, I would have questioned their sanity.
My idea back then was that I could stand a low yield
but had to have that FDIC insurance at all costs.
I guess the lesson is "never say never".

JG
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Re: Of Human 'Bond'age
Old 02-09-2005, 10:52 AM   #2
 
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Re: Of Human 'Bond'age

Mr. Galt, I've read in some of your other posts that you are considering selling some of those long-term bonds and getting 5 year CD's. I think this might be a safer move for you. Those long-term bonds could really suffer if rates accelerate, as you know. Why not 25/25/50 of Bonds/CDs/Real Estate? Good luck.
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Re: Of Human 'Bond'age
Old 02-09-2005, 11:31 AM   #3
 
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Re: Of Human 'Bond'age

Why not indeed.............25% bonds/25% CDs/50% real estate
makes perfect sense, and I can still sell some bonds at par if I want to move into CDs. Addicted to that 7% yield I guess On pure bonds, the lowest rate I am getting right now is
5% AAA rated. When I went into it you couldn't find a
5 year CD paying 5%. My theory was that (1) It was
just as safe as a CD, and (2) It was "forever" money
so if the NAV dropped I could just hold on. So, where
I am now is thinking how much better off am I getting
7% instead of 5%, but without the FDIC and with the NAV risk?
Is the 2 points worth it? Not sure. Probably not.

JG
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Re: Of Human 'Bond'age
Old 02-09-2005, 01:22 PM   #4
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Re: Of Human 'Bond'age

JG, I don't think you have a prayer for finding 7%
AAA bonds. Anything close to that is going to be
junk. If I understand your persuasion, you would
be better off building a 5 year ladder at Penfed
or buying floating rate bonds on the secondary
market. There are several companies rated A or
better with secondaries yielding 2+% + CPI.

Cheers,

Charlie
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Re: Of Human 'Bond'age
Old 02-09-2005, 03:30 PM   #5
 
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Re: Of Human 'Bond'age

Hi Charlie. I agree that my 7% is all
"junk" or near "junk". The 5% is AAA. I also have a
small amount in CDs. Anyway, the question is whether
the extra 2% is worth it. I think about it a lot. I honestly don't know the answer and suspect each ER
needs to answer it for themselves.

JG
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Re: Of Human 'Bond'age
Old 02-09-2005, 08:34 PM   #6
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Re: Of Human 'Bond'age

JG, if you buy your "junk" at the right price and
use a fund to spread the risk then adding some
to your port is not a bad idea. Buying individual
junk bonds seems riskier than buying individual
stocks IMHO. I believe I mentioned this before
but have you considered an immediate annuity
for your "forever" money? That's the only "safe"
way I know to get 6+% until you and your wife
are both pushing up daisies.

Cheers,

Charlie
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Re: Of Human 'Bond'age
Old 02-10-2005, 05:34 AM   #7
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Re: Of Human 'Bond'age

Quote:
*This was
before I developed my 50/50 bonds and real estate
theory.

JG
What kind of real estate do you own? REITS, rental property or what?
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Re: Of Human 'Bond'age
Old 02-10-2005, 07:00 AM   #8
 
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Re: Of Human 'Bond'age

Home in Illinois, condo in Texas. That's it. Condo mostly rented and probably will continue.

JG
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