# Milevsky on bonds: "Six reasons why I won't buy them"



## MoneyGal (Apr 24, 2009)

From today's Toronto Star:

_At first thought, there is nothing quite as comforting as the safety of government bonds. You’re guaranteed to get your money back when they mature, the coupons are paid on a regular basis, the risk of default is miniscule and if you are in a pinch, you can always sell them for cash.

And yet, I really don’t like bonds and don’t own any. Why not? Here are six reasons and if any my arguments resonate, you should consider lightening up on your bond holdings as well. _


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## CanadianCapitalist (Mar 31, 2009)

MoneyGal said:


> From today's Toronto Star:
> 
> _At first thought, there is nothing quite as comforting as the safety of government bonds. You’re guaranteed to get your money back when they mature, the coupons are paid on a regular basis, the risk of default is miniscule and if you are in a pinch, you can always sell them for cash.
> 
> And yet, I really don’t like bonds and don’t own any. Why not? Here are six reasons and if any my arguments resonate, you should consider lightening up on your bond holdings as well. _


Hard to disagree with the reasons why Prof. Milevsky prefers not to hold bonds. Here are my reasons for holding them:

1. I'm a stock -- and a very volatile stock at that -- not a bond. I work in the semiconductor industry that is closely tied to the vagaries of the global economy.

2. I do not have a DB plan.

3. I own short-term bonds -- a good hedge against inflation. Of course, in a deflationary period, bonds will outperform.

4. The most important role for bonds in a portfolio is to reduce volatility. Most people just can't handle the volatility of 100% in stocks. 

5. Tax isn't an issue. I just hold bonds in a tax-sheltered account.


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## andrewf (Mar 1, 2010)

I agree with many of these points. I do, however, feel for the retired or soon-to-be retired without large DB pensions. With bond yields where they are, they don't have very good options available to them.

Also, here:

"Inflation-linked bonds do offer protection but the measure of inflation is defined by the same government that has to make the payments. Who’s going to get the better deal? That conflict of interest worries me."

The same concern applies to DB pensions and indexed life annuities.


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## Four Pillars (Apr 5, 2009)

How old is Milevsky? That might be a bond factor as well.


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## MoneyGal (Apr 24, 2009)

1967 represent! (Moshe and I were born in the same year.)


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## MoneyGal (Apr 24, 2009)

p.s. Moshe likes to introduce himself at the "Stock or Bond?" seminars he gives this way: 

_Hi, my name is Bond -- Moshe Bond. _


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## HaroldCrump (Jun 10, 2009)

With all due respect to Prof. Milevsky, there _are_ valid reasons to hold bonds.
CC listed some of them very well.
I have heard many of such never buy this, never buy that, always do this, and other such extreme opinions.
Like our dearly MIA Leslie would buy only pref. shares and nothing else.
Some folks swear by bonds and will not touch anything else.

I personally like bonds for the stability and income it provides.
I have often looked into prefs. but never bought any because I'm taking equity-like risk for less-than-bond yields.
I also find that short term bonds and lower end of mid-term bonds provide adequate inflation protection, as long as you ladder them or rotate them upon maturity.
I would say though bond mutual funds aren't worth it.
ETFs are probably ok, as long as the fees are less than 25 bps.

Again respectfully, I'd say that Prof. Milevsky's #6 reason is really his #1 reason - he just won't admit it.


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## warp (Sep 4, 2010)

I absolutely agree with HaroldCrump.
Its all about reason # 6.

The "Professor" Moshe does not need to buy bonds, because WE , the taxpayers are buying them for him....Through his government pension!
And it's a disgrace!

He will get a big defined pension, ( tied to inflation), because he works for us!
He is a government employee, so he can laugh and dance knowing he will collect for life...and we have to bite our toungues knowing we will have to pay him, and those like him forever!

This means rising taxes for us, and quite possibly , our children.

The rest of us have to save, into a defined contribution plan,,,,which means we have to live off of our OWN money.

Thats why he can be so cavalier about not buying bonds...if his portfolio drops by being 100% in global stocks right when he needs the money to eat...he need not worry as his next govenment pension check, ( which we are paying to him), is in the mail.
Then he squacks about the taxes "he" would have to pay on his bond income. ( Rest assured NOBODY hates taxes more than me).

The public services unions will destroy this country if we can't find politicians at all three levels of govt, who will finally say enough is enough and stand up to these thugs. ( The Toronto garbagemen's union comes to mind).

As for us regular folk....bonds and fixed income are a neccessary part of your asset allocation....to provide stability, and income...the percentages are up to each individuals risk tolerance etc.

Anthony


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## andrewf (Mar 1, 2010)

^

I don't think professors make undue wages because they are public employees. The market for academics is pretty competitive, and you have to pay for talent. Private universities are often as or more generous than their public brethren.

Now, garbage collectors on the other hand...


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## davext (Apr 11, 2010)

I think there's always a place for bonds in your portfolio although long term bonds are not looking very attractive right now, short term bonds are still relatively safe. Just adjust your allocation based on the market. 

I made at least 10% on a lot of the bonds that I bought in 2009 because there was concern that companies would go bankrupt. 

Like CC said, I am able to stabilize the volatility of my portfolio by having short term bonds using XSB.TO. It also pays interest monthly!


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## warp (Sep 4, 2010)

ANDREWF..

As far as I'm concerned, EVERY public employee is overpaid.....and most of them are underworked too.

I think what bothers me the most is that their pay and benefits are way out of line with what people in the private sector get for similar duties.
The perks they get including those fat pensions can only be dreamed about by regular working people, especially the middle class.

Its Governments at ebery level that have constantly caved, and given in to these ludicrous union demands that have cause the problems we have today with these massive deficits.
The politicians would all rather settle , and not cause waves, and leave the problem to whomever is in power years down the road,,,,at which time, by 
the way, they too will be collecting their own fat pensions.

The whole thing is a joke and a disgrace.
\Sorry for the rant,but Im sick and tired of the mess all these guys created.

Back to XSB..( short term bond etf)
I have been thinking of buying some,,,but as I look at individual bonds, the yields are so low that it makes no sense to buy them.
If thats the case whay would buying an ETF full of short term bonds make any more sense?
I have been grappling with this for a while now, as like everyone else I am looking for some yield.

By buying XSB you are buying todays short bonds,( at low yields), and paying up for yesterdays existing bonds, but at a premium due to the low rate environment of today.

What am I missing???
Any thoughts would be appreciated.


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## HaroldCrump (Jun 10, 2009)

I don't think you are missing something.
With bonds you have a couple of time-tested strategies: staying short and laddering.
When you stay short (like with XSB), you are essentially saying that mid and long term yields do not compensate you enough for the interest rate and other risks and, in some cases, the lack of liquidity.
With short term bonds, you (or the ETF on your behalf) will be cycling the bonds and thus always stay in step with the short term expected inflation.

With laddering, you are essentially saying you are not betting on any particular direction of interest rate movement.
You will be re-cycling your debt every 5 years (for example) and thus secure a higher yield at those points.
This will work as long as the yield curve loosely resembles an acute angle.
If the curve is flat, this strategy will be indifferent.

I agree with your comment about the imbalance between the public sector and private sector.
Tax revenues generated from the private sector pay for the fatcats.
Yet the benefits and compensation of the private sector is inferior to that of public sector, esp. security, vacations and pensions.
Long ago, the base salaries of public sector for similar job roles was quite a bit less than the private sector.
That inequality has been reduced with the excuse that public sector was not able to attract and retain the required talent and skills.
Now instead, we have the reverse inequality where the private sector workers are funding the decadent lifestyle of their public sector counterparts, yet I don't see any perceptible appreciation of the average talent/skills in the public sector.


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## Belguy (May 24, 2010)

During the heart-wrenching drop in the equity markets in 2008, I was mightly glad that I had 40 percent of my portfolio in bonds!!!!!!!!!!!!!

Most of my friends with government pensions don't have to worry about how the stock market is performing as those indexed cheques just keep rolling in like clockwork. GIC's are good enough for their purposes.

There are those that have and those that have not. It is endlessly maddening that public service workers are the ones that receive the best pensions fully indexed and paid for by the taxpayers who are sinking deeper and deeper in the hole. How did that ever come about in the first place?

I say to keep the ones who are willing to give up their gold-plated, indexed pensions in return for those similar to what private sector workers receive and fire the rest.

(Note: I have deleted my earlier comment and apologize to any who I offended).


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## kcowan (Jul 1, 2010)

I think moaning about public sector benefits is a waste of time. It is what it is. Suck it up!


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## MoneyGal (Apr 24, 2009)

1. What Keith said. We've had this discussion to death on this board. 

2. University professors are not actually public servants. 

3. Here's the latest data on university professor salaries from Statistics Canada. One could make the argument that, given the number of years of training required, university teaching staff are *underpaid* compared to other professions with similar training requirements:

http://www.statcan.gc.ca/pub/81-595-m/2009076/t/tbl002-eng.htm

If you look at all of the categories (tenured, assistant, etc.) across all universities, full-time teaching staff earn an average of about $80K to $122K.


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## davext (Apr 11, 2010)

If you buy XSB, don't expect a return of more than 3%. Since they are short term bonds, there is much less volatility so I feel pretty safe. I'm happy with it for about 5% of my portfolio or as a place to hold it until I want to move it to somewhere else. Recently I've been asked to help with a second mortgage that pays 7% interest over 1 year so I'll probably switch over to that. 


I agree with over payment of government employees as well which is why my long term plan is to get a government job. I have to join them if I can't beat them.


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## warp (Sep 4, 2010)

To: MONEYGAL

1) University Professors, for all intents and purposes are indeed public servants. 

2) Do you really think , on average , that they are worth 80-122K a year??

How much real work do you think they do for that renumeration?

Personally I do not,,,,,and the ones I have known are, almost to a point, left wing idealists and socialists, who wouldn't last 2 weeks in the real world.
That was absolutely my experiance as well, many years ago, when I went to university , and was actually "bullied" by my professors and some fellow studentsfor being a young capitalist, and letting my free market views known.

I dare say many middle class workers would love to earn even that "low end" $80 K a year you posted.......and have job security, ridiculously generous benefits, and a fully indexed pension to look forward to forever!


Of course until some courageous politician takes the bull by the horn, things will never change.
I myself came within a breath of running for city council here in Toronto, as Rob Ford candidate. Maybe nesxt time.

Back to XSB...

Harold, I do understand laddering..I own individual bonds set to mature at different intervals and years. Unfortunately for me,,,,several of these bonds have been redeemed early due to the low rates corps can now get, leaving me with cash that I cannot get the same yield with today.
This is known as interest rate risk and it happens,

My point is that if individual short bonds are not worth buying,,,,,,why then would an ETF that holds short term bonds be worth buying??

The ETF has the same problems as I . the reatil ivestor has,,,the only diff being that as a big buyer, they can buy the bonds cheaper than I can,which certainly is a benefit.

Certainly , though, I am staying away from any long term bonds at all.

Which leads to the prolem we are all having.....getting some reasonable yield on our cash and bond holdings without going too far out on the risk curve.

For that I have bought high yield bonds. I also have a few preferred shares ...but all are cumulative, and all have retraction dates, unlike the new batch of re-set prefs that are being pushed now, which I dont really like.

Any thoughts or suggestions?


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## MoneyGal (Apr 24, 2009)

I suspect you did not study finance.


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## warp (Sep 4, 2010)

Moneygal...

What exactly did your smug remark prove?

I assumed this board was a place where ideas could be discussed with some mutual respect.

I studied Finance long enough , in the real world, to run successfull small businesses, and to live off my investments alone, without working for many , many years, while still being years away from collecting my CPP. 

That being said, I am smart enough to know that I dont know everything, that theres always a different opinion to consider, and that I might learn a thing or two on this board.

Why are you on here , exactly?


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## heyjude (May 16, 2009)

MoneyGal said:


> 1. What Keith said. We've had this discussion to death on this board.
> 
> 2. University professors are not actually public servants.
> 
> ...


I am a full professor at one of the universities listed. I do a significant amount of teaching and research. While the StatsCan website lists numbers that seem quite generous, in fact, my university contributes less than $5000 per annum to my income. The reason: I am a physician. My clinical income is subsidizing the university, which could otherwise not afford to pay me for my time.


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## MoneyGal (Apr 24, 2009)

Sorry, warp, my remark was not intended to be smug. I apologize if that's how it seemed. 

It just struck me that it would be unlikely that you would be "bullied" (in your words) for having free-market views if you were studying finance at university. That's it - no other meaning intended.


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## fatcat (Nov 11, 2009)

> It just struck me that it would be unlikely that you would be "bullied" (in your words) for having free-market views if you were studying finance at university. That's it - no other meaning intended.


 for what it's worth that's exactly how i took moneygal's comment as well warp


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## warp (Sep 4, 2010)

Perhaps "bullied" was the wrong word. I actually thought about that even before you replied, after I read my own previous post.

A better word would be "mocked".

And in fact it was indeed a university class in Business and Finance.

I distinctly remember a day in class with my "professor" ,when I was making a point in how I believed in the free market system, and being "mocked" by him for it, in front of the entire class.
I said "well that's my opnion".....and he said word for word...
"your opinion is not good enough"

As you you can guess, I did pass the course, but with mediocre grades, assurably because my ideological ideas didnt jive with his.

This was strange to me ...and it became evident a couple of years later, when I was running my own business, that this guy, who was supposed to be training young minds, had absolutely NO clue how the real world worked.

And basically almost every professor was like that, more or less...the difference being only to what degree you had to agree with them to get good grades.

Back to the questions about short term bonds and XSB...
How can we get the best risk/reward returns for our bond holdings?...those holdings being in our asset mix obstensively to provide stability and income.


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## fatcat (Nov 11, 2009)

how about the claymore 5 year laddered bond funds, they are split equally into a 5 year ladder with 5 bonds in each

not paying much though

you could split between 2 of them the government CLF is 1.8 yield to maturity and the corporate CBO is 2.42 to maturity

though at those rates, might as well just keep in a HIS like ally at 2%

i mentioned revelstoke credit union which is offerring a variable rate 18 month gic at prime minus .25% which gives a yield of 2.75 for an 18 month investment

it would only go down if the prime rate goes down, not a likely event unless we go back where we were


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## warp (Sep 4, 2010)

thanks Fatcat.

my reasoning is a lot like yours , on your reply.

the yields are so low on short bonds and ETF's....CLF and CBO as you mentioned, that it actually seems to make more sense to take the ALLY 2% and have your money liquid and avaliable any day you need it.

Also I prefer to buy more high grade corporate bonds, and less govt bonds, as the yields are higher and the default risks are low. At a minimum I'd buy provincials over Canadas as well for the same reason.

I do own some JNK, as i've said, but for only a small part of my overall portfolio.

I'm certainly not a financial visionary, but I personally cannot see how interest rates can stay this low for much longer. People buying long term Canada's or especially long term US Treasuries are bound to get hurt.


The huge amount of money that has been flowing into treasuries just shows how theres still big worries out there about the markets......and peoplr are flocking into "safe" investments.

Could it be that it's time to go against the herd, ( which usually works), and sell your bonds, and buy more into the equity market,( individual stocks or ETF's)??


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## fatcat (Nov 11, 2009)

i am buying equities and plan to average in over the next few months

it either will start to break the other way (for stocks and against bonds) 

or we are in for a long ugly slog or even a huge downward correction

i totally agree that a 2% HIS is the way to go

the "opportunity cost" is about .5%

cash is indeed an asset allocation and many of the "experts" are in all cash at the moment


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## bean438 (Jul 18, 2009)

kcowan said:


> I think moaning about public sector benefits is a waste of time. It is what it is. Suck it up!


Bingo! It is what it is.

I dont like bonds. They pay a fixed income, and they also fluctuate in value, but most people dont see it because they invest in bonds for the income.

Dividend growth stocks also fluctuate in value, but they also provide a growing income that at least keeps pace with inflation, usually outpaces inflation.

But then again I am an underworked, overpaid civil servant with a gold plated DB pension that I don't deserve.

I also deserve to have my DB pension clawed back when i receive OAS and CPP.
Kind of chips away at the gold plating. It is what it is.


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## davext (Apr 11, 2010)

Regarding Quote:
Originally Posted by kcowan 
I think moaning about public sector benefits is a waste of time. It is what it is. Suck it up!

Canada is just the younger version of Europe. Wait till the austerity measures come in I don't know how many years. Who's going to be moaning then??? It'll be the public sector and the rest of us will be screwed too.


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## kcowan (Jul 1, 2010)

davext said:


> ...Wait till the austerity measures come in I don't know how many years. Who's going to be moaning then??? It'll be the public sector and the rest of us will be screwed too.


The secret to successful investing is to anticipate the future and invest accordingly, not to try and change what it is.


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## HaroldCrump (Jun 10, 2009)

warp said:


> Back to XSB...
> 
> Harold, I do understand laddering..I own individual bonds set to mature at different intervals and years. Unfortunately for me,,,,several of these bonds have been redeemed early due to the low rates corps can now get, leaving me with cash that I cannot get the same yield with today.
> This is known as interest rate risk and it happens,
> ...


Well, your problem is not unique.
Pretty much everyone in today's investing climate - small retail investors to large pooled investment plans - is facing the same problem.
There is a lot of yield chasing going on right now.
Just look at the yields on low quality bonds.
A typical BB bond that would have traded less than 90c. on the dollar, if that, is now trading at premiums of 6 to 10 bps.
Pretty much anything that yields anything is being devoured by inidviduals and institutions.

Going back to bonds, I personally consider bonds to provide two things in my portfolio - stability from the volatality of stock market (since I only buy individual bonds, hold them to maturity and rotate) and secondly, a pre-defined income that stays in step, or just ahead, of inflation.
Your objectives may, of course, be different.
IMO, bonds continue to serve these two objectives even in such low yield market like right now.
As long as you don't compromise credit quality too much while yield chasing, you should still be able to accomplish both objectives.
The low yields are reflective of low expectations of inflation moving forward.
Of course, the bond market could be wrong and if that happens, you'll see the yields climb up as soon as inflation starts to appear on the horizon.

My bond selections are limited by what the brokerage has in its inventory.
I do not go lower than BBB(low) and do not go longer than 6 to 7 years.
Buy and hold until maturity and re-cycle.

I have looked into prefs. but somehow always ended up not buying.
You take on both equity like and bond like risks, yet the yields are lower than bonds, and the gain potential is lower than commons.

Convertible Debentures are sometimes attractive, assuming your brokerage participates in the IPO and you can get a piece of that.
Once they start trading, they are often at a premium these days because of the yield chasing.


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## fatcat (Nov 11, 2009)

> My bond selections are limited by what the brokerage has in its inventory.


 which is usually crap compared to what they offer to their own clients ... i know how the system works but just don't think it's at all fair


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## fatcat (Nov 11, 2009)

interesting article on cnbc 
it seems like investing is now boiling down to figuring out what the fed will do ...
the fed has got itself in a real pickle i think


> Bond Market at 'Extreme Danger Level': Strategist
> Published: Monday, 11 Oct 2010 | 9:34 AM ET
> 
> A small rise in inflation may trigger a correction for the bond market, as too many investors have piled in, Roman Scott, managing director at Calamander Capital, told CNBC Monday.
> ...


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## warp (Sep 4, 2010)

HAROLD, and FATCAT...

The selection of individual bonds at the discount brokerages right now are awful.
As well there is a built-in spread, that is hidden into the price, and lowers the yield you would get.

I have seen this on individual bonds that I own......I can see what the brokerage is selling the bond for,,,,then I switch pages and see what they will pay me if I sell it to them.....the spread can mean a lot!

The problem is simple,,,,I cannot buy the bond from the seller directly,( like stocks)....and he cannot sell this bonds directly to me.
We must both go through the brokerage...who is basically acting as the middleman ( as in casino), and collecting his cut, which hurts us both,,,the buyer and the seller.

There has been a cry to change this, and have bonds act like stocks,,buy or sell and pay a disclosed commission....but the big banks are fighting like hell not to have this system changed as they make out like bandits on it.

HAROLD..
You said you buy individual bonds, hold them to maturity and rotate.
HAve you ,( as I am doing now), ever conseldered at what point it might make sense to sell the bonds you bought in the past, which have risen in value due to the low interest rate environment, and take the capital gain now?

I have bonds that i bought over the last few years that I intended to hold to maturity, but all are now showing some nice capital gains.

I have talked to bond experts including Mr Cunningham, ( his first name escapes me at the moment), who is considered one of Canada's leading bond experts,,,and he has no clear answer for this either.

If bonds are nearing a bubble, and if going against the herd usually works,,perhaps it might be a good idea to sell the bonds,,take the capital gain,( great tax-wise), and buy more equities, and perhaps park some of the cash into XSB or ALLY.

What are your thoughts?


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## andrewf (Mar 1, 2010)

FWIW, I haven't met any economics or finance professors who were unsympathetic to 'free-market' ideology. Even so, a few anecdotes hardly seems fair justification for saying that professors don't work hard or earn their keep.


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## fatcat (Nov 11, 2009)

> I have bonds that i bought over the last few years that I intended to hold to maturity, but all are now showing some nice capital gains.
> 
> I have talked to bond experts including Mr Cunningham, ( his first name escapes me at the moment), who is considered one of Canada's leading bond experts,,,and he has no clear answer for this either.
> 
> If bonds are nearing a bubble, and if going against the herd usually works,,perhaps it might be a good idea to sell the bonds,,take the capital gain,( great tax-wise), and buy more equities, and perhaps park some of the cash into XSB or ALLY.


 it's hank cunningham, i have his book, he is a huge fan of laddering which sort of takes a lot of the risk out of "playing" bonds ... your plan sounds reasonable to me, especially if we are in for a bond crash, if the fed does a big qe2 and there is a jump in inflation and the article that i posted above turns out to be true, it would be a good move ... but truly, i don't know, all bets are off ...everything is revolving around the fed and what will happen in the usa


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## warp (Sep 4, 2010)

Andrewf,

I respect your opinion, and you have every right to it.

Heres my opinion, 

EVERY public sector worker, including professors, are overpaid and underworked.

I base this on a comparison with the private sector, or self employed individuals.

Add in their out of this world benefits, and their OUTRAGEOUS defined , tied to inflation forever, pensions, and it really makes me sick!

Add in as well unions that make it near impossible to fire even the most useless, rude, and incompetent worker.

When I was going to university, I had a part time job at the Post Office sorting plant.
The unionized workers told me a story about a member who was caught stealing. When I asked if he got fired, they just laughed, and said that not only was he not fired, but he was on medical leave , while the taxpayers were paying for him to see a phyciatrist, because he obviously had a problem if he was stealing!
Imagine that!

Again thats my opinion...and I have a feeling more and more middle class working people agree with me.


Thats hopefully the last I will say about this, and will try to get back, on this thread, to a discussion about bonds


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## warp (Sep 4, 2010)

Thanks,
FATCAT,

Yes his first name is Hank....Hank Cunningham.
I was going to write in my post, "Howard cunningham"...but then remembered that he was Ritche's father on "Happy Days".,,so I knew that wasn't right, and laughed to myself.

I read his book last year....and have talked with him a few times.
He is quite a nice gentleman, and I appreciated his time.
I have seen him on BNN a few times too.

He is quite the believer, as you said, on laddering bonds, with maturities over 1-7 years, or so.
That system makes sense when rates are reasonable...but right now rates are so low , and so much money is pouring into bonds and bond funds, that I do wonder if the whole thing isn't ahead of itself.

That being said,....if we as retail investors hold our bonds to maturity, we at least know our outcomes.

As an afterthought...zero coupon or "stripped bonds", were always a pretty good idea for your RRSP or RRIF.
( you should never buy them in a taxable account)
However the rates on these are absolutely pathetic now....and there is no reason I can think of to tie up money for years and years to recieve 2%.

I have used them in the past..by luck one of my best being buying a govt Canada stripped bond yielding 12.7%, that I bought in 1986...which matured in 2007.... apprx 21 years.

Cost me $3,850.00......matured at $50K.....

I have had dreams that I had put all my RRSP money in those bonds back then!
But today is a whole different world.


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## Square Root (Jan 30, 2010)

Over my career I have met and worked with a number of civil servants. Some are underworked and overpaid no doubt. I personally know many who are dedicated hard working professionals and who weren't making a lot of money. To suggest that all civil servants fall into any general classification as suggested by WARP is ridiculous. Get a grip man. I have a pension that would knock your eyes out and I have never been a civil servant. Don't need no bonds in my portfolio.


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## HaroldCrump (Jun 10, 2009)

warp said:


> HAROLD..
> You said you buy individual bonds, hold them to maturity and rotate.
> HAve you ,( as I am doing now), ever conseldered at what point it might make sense to sell the bonds you bought in the past, which have risen in value due to the low interest rate environment, and take the capital gain now?


I have capital gains in my individual bonds, too, but I'm not going to sell.
Firstly as you and others have said, the brokerage spread is unfair to small retail investors.
I already paid them a large "commission" when I bought, and I'm not willing to pay another when selling.
There are a lot of mis-pricings in the secondary bond market, particularly for non liquid corporate issues.
Secondly, the credit quality is quite secure so there is relatively less risk of the bond not maturing.
When they mature, I'll rotate them for another 5 - 7 year term.
Thankfully, I don't have any maturing during the next 2 years.

To Square Root: I'm sure there are conscientious, hard-working and highly skilled folks in the public sector, just as there are slackers and suckers in the private sector.
In fact, the bureaucracies of large public corporations like our banks, utility companies, etc. are no less than those in the Govt. sector.
However, what warp and I were saying in the previous post is that the benefits the public sector employees enjoy are at the expense of the regular Joe taxpayers, who are struggling to make ends meet.
The private sector workers (hard-working or not) are funding the cushy retirements of public sector workers (hard-working or not), when they have nothing that comes even close.
You find nothing wrong with this picture?

Further to the example of the Postal Office workers, do you recall the asleep-at-the-job TTC workers? and the 20-minute coffee break driver?
If you live in or around Toronto, I'm sure you'll recall that.

IMHO, it is absolutely shameful how the vulturous public sector sucks out tax revenues from struggling middle class folks to fund cushy jobs and ever cushier retirement packages for its folks.


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## kcowan (Jul 1, 2010)

HaroldCrump said:


> I have capital gains in my individual bonds, too, but I'm not going to sell.
> Firstly as you and others have said, the brokerage spread is unfair to small retail investors.
> I already paid them a large "commission" when I bought, and I'm not willing to pay another when selling.
> There are a lot of mis-pricings in the secondary bond market, particularly for non liquid corporate issues.
> ...


I also run a bond ladder and cycle things for another five years when they come due. It is easy and avoids the constant speculation associated with ETFs or bond funds. Frankly the yields are gradually declining. Buying bonds at IPO sometimes helps eliminate the bond desk spreads.

On the tragedy of the public sector rip-off, we can only hope to elect responsible politicians but I am not hopeful and tend to think of that term as an oxymoron.


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## Financial Cents (Jul 22, 2010)

A good article, but biased I'm afraid. I would strongly argue that if Moshe did not have a juicy DB plan, he would have a bunch of bonds in his portfolio. 

Because of his DB plan, I agree, he can be a little more frisky and risky with his investments on the equity side. Most Canadians don't have this luxury.


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