A friend writes:The bond board has been strained as of late. Some of the discussions are down right scary, in that the "opposition" (or holders of the polar opposite view point) are so singularly SURE of their method for everyone.In truth, I’d have to confess myself guilty of that as well, all the while hoping that I am wrong about the likely gap between what people achieve for themselves with their fixed-income investing and what they might actually need. Under the rosy scenario of a robust economy, full employment, a fiscally-responsible Congress, an interest-rate environment that offers a chance of obtaining a real rate of return, plus the newly-found ability of human beings to accurately predict the future, then “Yes” FI investing strategies that depend on very narrow margins of error should work out quite well. But until those unlikely events all align themselves in a perfect summer’s day of investor bliss, I prefer to take on the risks now that I have to in order to achieve the comfortable margins of safety that lessen future risks. What’s the downside of my methods? My children have to spend a fortune, and the charities designated in my benefit quite handsomely. The upside? I will never run out of money before I run out of life. What’s the downside of the methods of my opposition? That they will continue to beggar this economy with their need to be bailed out of their short-sightedness through old-age relief programs that they will promise to pay for by robbing their children and children’s children. What the upside? There is none. “I told you so” isn’t an upside. Sad, isn’t it, that supposed intelligent people are unwilling to examine the macro-economic facts for themselves and do a bit of simple arithmetic?
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