UnThreaded | Threaded | Whole Thread (1) | Ignore Thread Prev | Next
Author: PaulItIs Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35400  
Subject: Bond bubble to burst? Who cares? Date: 8/11/2010 8:15 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 3
First, I apologize for the provocative subject. I think I know who cares and why; I'm just surprised that their numbers are so large.

I invest in bonds/bond funds for the income they generate with the expecation that issues are held to maturity and then rolled into new issues. Barring some unforeseen financial opportunity, or some (God forbid) unforeseen personal financial disaster, I will never sell a bond on the secondary market. I think there are lots of investors like me. This seems like the most prudent investing strategy for bonds. Interim bond values are moot and rising interest rates are good: maturing bonds will roll into higher-yielding issues. Over time, the invested money yields, on average, the going interest rate, with some lag time depending on the maturities of the bonds. You have to tolerate changes in asset value, but if you're not pressed to sell at any particular time, that really doesn't matter.

What surprises me is that so much of what I read in the news about bonds and the "bond bubble" seems to be written to those who are investing speculatively in bonds, perhaps trying to time interest rate fluctuations. Or perhaps those who are worried about a bubble are in a situation where they may be forced to liquidate the bond before maturity.

So, after all that, I think I know the answer to my question. People must care about the "bond bubble" because they're participating in the secondary market. So, I'll change my question. Why is there so much (apparently speculative) activity in the secondary market? It seems at odds with the generally more conservative nature of bond investors.

If you read this far, thank you.

Paul
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (1) | Ignore Thread Prev | Next

Announcements

Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Looking at Currency Ratios
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement