Larry House

Fears of Inflation Seem Overblown

The risk of inflation is real. Inflation is contained until we get a resurrection of the economy. Don't count on the Fed timing correctly the withdrawal of liquidity. They have never gotten that right, and they won't this time.

Time to Forsake Stocks for Bonds? Arnott and Arends Square Off

No argument here with a diversified, world allocation. I am using PGMDX for that. I do think we are entering a time period, perhaps a decade, perhaps less, where a ladder portfolio of corporate bonds may very well beat equities and reduce risk as well. Part of the portfolio should mature each year to take advantage (if it is an advantage) of current interest rates. I prefer that approach, bonds held to maturity, over a bond fund.

Comparing Nine Asset Categories

Thanks very much. Useful info.

Bond Market Outlook: Think Short Term

Reasonable. I like LSBRX. Overall credit quality is somewhat lower, but it is a good fund yielding about 8%.

Obstacles to Income Are Not All Inside the Portfolio

Your "one-offs" are not really obstacles to income, but they sure soak up income. I retired four years ago. I went to work part-time more for something to do than anything else. My wife's income was unexpectedly cut by 75%, and I went full-time out of necessity. Thank the Lord I had that opportunity. My point is retirement is not apt to be neat and simple and fully follow all of one's expectations. The path to retirement is full of pitfalls (last year and a half), and during retirement, one just doesn't know what to expect--health expenses, "one-offs," repairs, etc. My best advice is try to be prepared, and that doesn't just mean the amount of money one has put aside. Try to maintain good health, garden, work part-time if one wants, get out of debt if not already, keep investing in a diversified way (I'm heavier in bonds now), and try to enjoy life. Life is much more than money, and a life of ease is not necessarily best. Americans are being put to the test again in many ways. I hope individually and corporately we will rise to the challenge.

The Downhill Slide: And February Makes Three

Some opine, and I tend to agree, that we are entering a new era, perhaps a couple of decades in length, during which paper assets--stocks AND bonds--are unpopular. And, along with that, people are just fleeing anything that represents risk. Investors are shell shocked, and when you are alone in the forest without a clue which way to go, one just hunkers down to wait. Every choice now carries risk--even cash--but the risk is less there.

The Riskiness of Bonds

To remove all risk is to get next to nothing in return. That is ok for must-have money, one's cash reserve, but moving beyond that, risk increases as does return or potential return. Bonds certainly have their risks. I held Lehman bonds when that fine business went under. I and many others were betrayed by the rating agencies and others. However, in the overall scheme of things, good-quality bonds have RELATIVELY less risk than bonds. I respect your writings very much, Felix, but you are twisting your thesis from the original piece you referenced. I read it as well. No one can argue with your statement that bonds carry risks, no duh, but your previous argument was more general in denigrating bonds--not just from a risk perspective. Keep up the good work. Let this topic go, and move on to some other helpful topics.

Is Buying Bonds Really a Good Idea?

Better-grade corporate bonds that can be held to maturity make a lot of sense right now. They won't look good if the stock market makes a V- bottom and heads much higher soon, but how likely is that? EVERYTHING is in question right now--growth or value, U.S. or foreign, oil and commodities, cash or not, stocks or bonds--every opinion is out there on every side. Keep it simple and keep expectations reasonable. This IS a time to lower risk. Wishing all SeekingAlpha readers and writiers a blessed, safe, and prosperous 2009.

Bonds are More Attractive Than Stocks for Now

Very useful article. Thanks for the analysis. Bonds in general appear quite attractive now, but on the other hand, they seem to be about as precarious as stocks. A huge unknown is how all the corporate refinancing will go over the next couple of years. I think that will keep pressure on junk bonds for quite a while. Yields are at all-time highs, but default rates are sure to climb in this environment--how high they will climb is a big question mark. High quality bonds appear to be the best choice even if yields are more muted, but even the soundness of GE is being questioned with their debt load. Utmost caution, short commitments, and lots of cash seems the best way to go for now. Thanks again for a very good article.

Defining a Set of Core Asset Classes

Irondoors91 is right on. What has worked in the past may offer no protection for the future. I think anyone with less than a 20-year time horizon for investments may be very poorly served by all porfolio theories. I may be wroing, but I see the present as a time when I don't want many of the assest classes. I believe in the idea of fewer baskets right now and watch them like a hawk. I think this is a horrible time for a shotgun approach--such as an index funds or mutual funds. There are just too many sectors that should be avoided now, in my opinion.