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Three Little Words For Bonds: Still A Buy

DoctoRx profile picture


  • Bond yields have cratered in the US.
  • The immediate cause was the spread of the coronavirus that causes COVID-19.
  • However, this move fits with multiple trends and still looks to me to have more 'legs,' which could reward investors with capital gains.
  • The nature of Treasury debt, or perhaps "debt," is discussed.
  • Also, the drop in yields to levels below inflation may make gold a good investment now.


As a longstanding bond bull, I'll just mention that the same structural factors pushing rates downward remain in force, including but not limited to these:

  • fertility rates consistent with declining populations
  • aging population (higher propensity to save, and save safely)
  • "good deflation" from increasing share of high tech in the economy
  • attractive differential between US bond rates and those in the EU and Japan
  • very high valuation of equities.
  • the Fed's propensity to make sure that "cash is trash."

One point I have not emphasized is the very special nature of central government debt, with specific attention to the United States. The next two sections relate to my view that:

US government debt is not really debt: background

Supposedly in a possibly drunken conversation in the 1920s, F. Scott Fitzgerald opined to Ernest Hemingway that "the very rich are different from you and me."

And supposedly, Hemingway retorted, "Yes, they have more money."

Just as there are different points of view about wealth and the wealthy, there are different ways to think about money. The traditional ideas about money were exemplified by gold (GLD). Money such as a precious metal was supposed to have been:

  • durable
  • a store of value
  • portable
  • divisible
  • used to settle debts and make payments
  • found in many parts of the world, so no one could monopolize the supply.

If I left some key points out, please forgive me and comment appropriately.

Under that principle, until almost the end of the 20th century, even though periodically some countries went to unbacked paper money, there was always a major country that was on a gold or silver (SLV) standard, or a bimetallic one. If I remember correctly, in the late 1990s, Switzerland dropped its partial gold backing for its currency (the Swiss franc or CHF), and with that, the gold/metal

This article was written by

DoctoRx profile picture
Over 40 years of investing in individual stocks. Retired physician (cardiologist). Also retired from various roles in the US pharmaceutical industry. Main focus is on growth stocks, mostly biotech and tech, but with fundamental value considerations. Secondary focus on macro trends driving asset allocation.

Analyst’s Disclosure: I am/we are long TLT, SPY, GLD, SGOL, MSFT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Not investment advice. I am not an investment adviser.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (17)

Thanks for another jewel of an article!
DoctoRx profile picture
BMXX, you're very welcome! Many thanks for the kind words; they are greatly appreciated.
Montana13 profile picture
I am sure there are several followers that would like to see a "buy list" vs the prospect of riding an index fund during what inevitably will be a recovery in some form.
Montana13 profile picture
How timely this article was. I bought a lot of MSFT bonds shortly thereafter, and just sold them this morning. I am truly perplexed where to go now, but the income vs capital gain made no sense to remain in the position. I might go taste Intuitive at these levels, as well as Novo Nordisk. Obesity rules, so NVO is represents a good dividend and promise for growth.
While I do not like ISRG for growth of usage in generic operations, after further reading the cardio vascular and neurosurgeon usage as well as urology indications are beginning to flourish with these younger generations of surgeons. So at 471 for ISRG, I am in for the speculative part of what I do.
DoctoRx profile picture
Montana13, thanks for sharing your thoughts. Good luck w your trades and (more impt of course) all the health issues that threaten us.
No Guilt profile picture
Great article!
DoctoRx profile picture
Thanks, No Guilt.
Great article, and given all the compelling evidence you have provided, the likes of me ask "how did I miss such a big move up in Treasuries, by being obsessed with the low yields"!
But I do wish to raise an off-topic question: does BIIB's comprehensive deal with SGMO potentially point to the former's increasing self-confidence with aducanumab?
DoctoRx profile picture
Alpine, thanks for the compliment.

Re your question about BIIB, I wouldn't infer that. Maybe, but BIIB is a believer in the amyloid hypothesis no matter how the FDA rules on adu.
Tiki Bar Capital profile picture
I was glad to have a sizable bond allocation in last week's selloff. But I'm worried about longer duration bonds going forward, Doc. Won't the massive money-printing that governments will need to do to meet entitlement obligations significantly devalue long bonds?

Liking gold very much now.
DoctoRx profile picture
TBC, "maybe" is my answer to your question. The Japan example suggests that's not a problem for the next few years, but a (surprising) return to high growth in the US a la the '90s would be bad for bonds...
sc21 profile picture
Would you consider doing a piece on TBC's question because it is core for most retirees. I don't have thirty years. I do have to protect the value of the assets I have or I could be out on the street. I don't think three lines gives weight to the issue. To be honest I don't know the answer but I think this is a core question. If the government is issuing more and more money, then the value of money and buying power will decline. If this happens your promoting bonds will only cause people to have less and less real buying power. I don't think you can logically promote buying both fixed assets and gold. I believe your argument for buying gold is right but that if that is corrrect then to much invested in fixed assets is a major error. Would value your consideration.
Lyn Alden Swietzer did a piece on the above issue about a week ago. Well worth your consideration if you did not catch it.
Thank you in advances for your thoughts. sc
Interesting article Doc. While the fixed income is up in my portfolio I
prefer dividend paying quality stocks at this time. Too bad Ebay is
no longer selling crystal balls.
DoctoRx profile picture
Al, have you tried AMZN for crystal balls?

I am also into dividend stocks, per my utilities article last week. I bt more utes Friday and am buying more this AM, also bt MCD for divvies on Friday.
So I'm with you. Continued GLTU.
Finsight Funds profile picture
Nice simple article DoctoRx.

While I’m not sure about the MT/LT, I increasingly agree with bond bulls the Fed can keep the game going.
DoctoRx profile picture
Thanks for the kind words, Connor, and for sharing your thoughts.
Green Elmo a.k.a. User 48289781 profile picture
DoctoRx, want do you think about zero coupon bond ETF's, such as EDV?

I'm holding some EDV, and I'm thinking about buying more.
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