Is this AA a mistake right now?

[Carpediem]

Thank you, REWahoo.

 

[NW-Bound]

Another way to look at it is being a "balanced investor" you are never 100% right, but cannot be 100% wrong either. Doing something different may do you very well, but also can hurt you like the Dickens.

As mentioned, I do not have a lot of bonds, but that does not mean I have it all in stocks. Rather, I put the money what would have been in bonds in lower-yield cash. And I did miss out on the gains bonds have had.

 

[pb4uski]

Bonds have been doing better than they should. Even Warren Buffett said so when he called it "Risk without reward". And even the Oracle of Omaha was wrong. ....

Buffett was referring to 30-year US government bonds and characterized them as return-free risk.... based on a view that the returns were insufficient given their interest rate risk.

Last week, Buffett issued a warning that we should all pay attention to. While being interviewed, Buffett indicated that the last asset he would want to buy is the 30-year U.S. Treasury bond. .....

In his interview last week, Buffett said that he thinks there is a good chance — not a certainty, but a good chance — that the 30-year U.S. Treasury, which currently carries a 2.5% yield, could trade at 60 cents on the dollar at some point in the near future if interest rates start to rise. ....

In early Feb 2015 when he said this the yield on the 30 year Treasury was ~2.5%... it closed today at 2.96% and the 30 year Treasury has declined in value. Another measure.... $10,000 invested in VUSTX on 2/8/2015 would be worth, with dividends reinvested, $9,718 today. It looks like Buffett was right to me.

https://dailyreckoning.com/warning-warren-buffett/

 

[Montecfo]

In early Feb 2015 when he said this the yield on the 30 year Treasury was ~2.5%... it closed today at 2.96% and the 30 year Treasury has declined in value. Another measure.... $10,000 invested in VUSTX on 2/8/2015 would be worth, with dividends reinvested, $9,718 today. It looks like Buffett was right to me.

https://dailyreckoning.com/warning-warren-buffett/

well, yeah. We are in a rising rate environment. The long-telegraphed increase in rates has begin. Hopefully folks are in short to med-term bonds, CD's or cash. How high? I tend to think modest on the short end, but the long end is a wild card, since so much of our debt is held outside our country.

 

[NW-Bound]

Buffett was referring to 30-year US government bonds and characterized them as return-free risk.... based on a view that the returns were insufficient given their interest rate risk.

Yes, "return-free risk" was the phrase that he used, and about long bonds. And I just saw that he was quoting someone else who used that first.

I said Buffett was wrong because he sounded the alarm quite early in 2012, and bond investors have enjoyed some gains since.

But in the view that Buffett back then said stocks should beat bonds, he has been absolutely right. Someone who's more heavy into stocks than bonds when Buffett said that in 2012 would do very well. So, I have to retract my earlier comment that Buffett was wrong.

Buffett is never 100% invested however. He likes to keep $10B to $20B in T-bill for liquidity, in addition to other forms of cash. His cash allows him to pounce when others ran into liquidity trouble, and begged him to bail them out as they did during the Great Recession of 2008-2009.

 

[NW-Bound]

well, yeah. We are in a rising rate environment. The long-telegraphed increase in rates has begin. Hopefully folks are in short to med-term bonds, CD's or cash. How high? I tend to think modest on the short end, but the long end is a wild card, since so much of our debt is held outside our country.

I have seen recent headlines that China is lightening up on US bonds. I wonder who the buyers are.

 

[NW-Bound]

Here's what Bogle said recently about bonds (10/2015). It sounded like he was disappointed in the bond index being too heavy in long government bonds.

Some people think you should be in the stock market or out, or in the bond market or out--or a total bond index. You don't have to do that. You could, for example, keep the total bond market index but move one third of it into an intermediate-term corporate-bond index fund. I think that's a little more work. And at some point, I think we all ought to be rethinking what a bond index is really about.​

 

[MichaelB]

I have seen recent headlines that China is lightening up on US bonds. I wonder who the buyers are.

We'll never know. A more interesting question, though, is "what will they do with the proceeds?". Unfortunately , that too we will never know.