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Author: richinaz Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35357  
Subject: Avoiding Gov Debt Date: 7/29/2010 7:47 PM
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Hopefully most people subscribe to the RSS fee of the Aleph Blog. He doesn't recommend individual stocks/bonds but has been a corporate bond manager in his past and usually has some insightful and cautionary tales.

http://alephblog.com/2010/07/28/the-education-of-a-corporate...



There has been a lot of talk lately about systemic risk, a concept that is not well-understood. Let me simplify it for you. Anytime debt grows in an area of the economy at a rapid pace, there is an unstable situation to be avoided. If you are a portfolio manager at such a time, you must take the tough decision and underweight the area of the bond market that is growing the fastest. That is not easy to do, particularly because that is where most of the new issues are coming from.

In the present environment, this would mean avoiding government debt. If you believe in inflation coming you can buy the short end, and if deflation, the long end, but aside from that, the ability of the US Government to repay is not growing as rapidly as their debts are.


Rich
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