Bonds Are A Terrible Investment Warren Buffett

[Rickson9]

For those who may be interested:

http://money.cnn.com/video/news/2010/10/07..._full.cnnmoney/

At the 1:30 Buffett calls Bernanke, Paulson, Tim Geithner, Sheila Bair to be heroes.

At the 1:50 Buffett praises Fmr President Bush

At the 2:30 Buffett talks about his definition for the end of a recession.

At 7:50 Buffett declares that the wealthy should be taxed more to help the lower, middle and upper-middle class. He continues to say that he pays a lower tax rate than his secretary and that this is wrong.

At 10:30 Buffett talks about the addictive nature of leverage.

At 11:30 "I think (bonds) are a terrible investment."

At 16:00 Buffett says the way help the "haves" and "have-nots" is through tax policy. Buffett then goes out to say that he was lucky to win the "ovarian lottery" and that he had nothing to do with it.

At 20:40 Buffett says he would be a disaster if placed in public office and then talks about what kind of person would make a good candidate.

At 22:30 Buffett talks about influence. Giving away wealth will hopefully influence people today and tomorrow.

In my opinion this was a very deep and fascinating interview! For those who are betting against Buffett - good luck with that! All the best and godspeed!

 

[bizaro86]

Thank you for posting this! I liked his definition of a recession, that it ends when real per capita GDP reaches its pre-recession high. That would be when people are, on average, are as well off as they were before.

At approximately 19:20, he completely dodged the question of whether President Obama is anti-business. He talked about it for about a minute, without actually answering the question.

 

[gwasser]

QUOTE (bizaro86 @ Oct 20 2010, 09:35 AM)
Thank you for posting this! I liked his definition of a recession, that it ends when real per capita GDP reaches its pre-recession high. That would be when people are, on average, are as well off as they were before.



At approximately 19:20, he completely dodged the question of whether President Obama is anti-business. He talked about it for about a minute, without actually answering the question.






Maybe Warren Buffett is a better politician than he claims to be.

 

[Rickson9]

QUOTE (gwasser @ Oct 20 2010, 12:19 PM)
Maybe Warren Buffett is a better politician than he claims to be.

LOL! Touchee!

 

[wealthyboomer]

The Next Disaster Fri, 08 Oct 2010Many commentators have noted that the public has withdrawn some money from stock mutual funds in order to buy bonds. If people were pouring into Treasury bonds, it would be a bullish sign, because it would reflect waxing conservatism. But most investors are not hiding in Treasuries; they are chasing yield! To that end, they are shunning Treasuries to invest in high-yield money market funds and bond funds, which hold less-than-pristine corporate and municipal debt. To show you how divergent these trends are, reports show that taxable corporate bond funds took in $26 billion in August and muni bond funds attracted $5 billion, but long term government bond funds drew only $191 million! But wait. It gets worse. Read these jaw-dropping excerpts from two Bloomberg reports:
Junk debt prices climbed to 100.115 cents on the dollar yesterday, the highest since June 2007, before record defaults on subprime mortgages sparked the worst financial crisis since the Great Depression.… (9/17)
Two years after the bankruptcy of Lehman Brothers Holdings Inc. caused credit markets to freeze, investors are embracing bonds backed by loans to consumers with weaker credit scores as yields approach all-time lows. Issuers have sold $4.4 billion of bonds tied to subprime auto loans this year, more than double the amount arranged in 2009.... (9/16)

The public always does the wrong thing. Investors have gone from the frying pan (the NASDAQ in early 2000) into the oven (real estate in 2006) into the steamer (the Dow in 2007) onto the grill (commodities in 2008) and now into the fire. Each time, they are sure that their decision is sound. But once again, it is not.

Remember in 1999-2007, when stock buyers were sure it was “all about incremental earnings”? The same belief held in 1927-1929 and both times it devastated investors. Now it’s all about “incremental yield,” with no regard whatsoever for the safety of principal. Bond investors, to put it bluntly and literally, are out of their (rational) minds, as much as they were on stocks and subprime debt in October 2007, the month of the all-time high in the Dow.

By 2016-2017, the issuers of today’s high-yield bonds, and even today’s A and AA bonds, will almost certainly be in default across the board. When pessimism finally overwhelms the financial markets, both the principal and interest on these bonds will become unpayable.

Source: Susan C. Walker Elliott Wave International

 

[bizaro86]

QUOTE (wealthyboomer @ Oct 20 2010, 08:18 PM)
and even today's A and AA bonds, will almost certainly be in default across the board.




While there might be a bond market bubble, (I know I've sold all of my bonds recently) this is a bit much. If all of the companies rated AA and lower were to be forced into bankruptcy, that would essentially be every company except for about 6-7. If that happens, what your portfolio does will be irrelevant, because you'll be worried about how much food you can grow yourself.



If you're honestly worried about a collapse like that, it might make sense to prepare for it (generater and stock of fuel, dried food, rifle for hunting, small weight gold coins for trading, water purification chemicals, etc).



But it doesn't make sense to prepare your investments for that scenario, because any and all investments will be wiped out, so what you've picked doesn't matter.



Michael