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A bond portfolio might steady things up some, but as you said, bond prices will tank just like stocks in a bear market.


Forget about bear markets. Instead, just take a look at today. Stocks are up hugely on news out of Europe, and bonds are getting trashed. Easily, I'll take a couple a hit of several thousand bucks today, just as last week (when stocks were crashing) my account values were leaping upwards by those same, several thousand bucks a day. So the question a would-be investor in either asset-class has to ask her or himself is this: Are you going to feel worse about being left out of a stock rally, or more comforted by avoiding a stock market crash?

Pull a chart of today's action. It's not unlikely that the DJIA will tag 12,000 and notch a 4% gain for the day. That's serious money, nearly half of what a typical bond investor can hope for from a whole year of investing. OTOH, if you look at the longer term, like the past ten years and what a (mostly stocks) investor like Buffet has done for his shareholders (compared with what a competent bond investor has done for her or himself), you'll see that bonds were the better place to be by about a factor of 4x. Does that mean Buffet is the lesser investor? Maybe not. But it does does suggest that his style of investing is out of synch with what's happening in the current market, and that's what a recent study has confirmed by comparing how Buffet has done second half of the 20th century to how he would have done in the first half. It's a huge difference and suggests that mere luck has played a bigger role in his performance than skill, just as the same must be conceded about the gains from bonds vs stocks over the past ten. The sheer, dumb luck of being in "the right place at the right time" explains most of the gains.

As for publicly disclosing some of my recent bond purchases, that's something I do only if I can make a broader point about investing. That's the stuff that I find interesting (who really is the audience for each post I write), not the naming of specific names. Sorry to be so coy about this. I also need to protect my "edge" in the same a fly fisherman doesn't give out maps to his favorite, small creek. But I will say this. There's nothing secret or special about anything I do. It's just basic value-investing as Ben Graham lays it out in his book, The Intelligent Investor. That's my operating manual, and I never make hugely-focused bets.

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