Bonds and Fixed Income

[NJHowie]

I hear you on the growth front and am well aware. However, once we had "enough", the objective migrated to capital preservation. I am extremely comfortable with the muni-heavy portfolio - it is extremely strong and historical data backs the fact that muni defaults are very rare in investment grade issues ... we're talking a default rate on the order of 1 in 10,000 issues over the past 50 years. What's the likelihood that you could even try to pick one to default with those kind of odds? Of course, when there is a muni default, it grabs the headlines and folks will point to it as the example of why munis are doomed. I currently hold somewhere around 300 muni issues - researched every last one of them before purchase. There were only two over the past 10 years where I was concerned of a potential default, and then they both were called.

As far as solvency of munis - state and local municipalities are generally stronger today than they have been in years. A number of big states are running fairly large surpluses the past two years as revenues came in stronger than anticipated/budgeted. As for treasuries, I don't agree that there are risks - they are 100% safe in my view. If there is a default in the treasury market, then there are much, much larger problems and most everything will have collapsed at that time.

As for Buffett and stocks - different strokes for different folks. I'm very happy with the predictable cash flow of my portfolio and knowing that in my old age it will provide what we need to maintain our lifestyle. The other benefit of having most of it locked up in municipal bonds (and CDs/treasuries/I Bonds/etc) is that it keeps me out of trouble and from doing something stupid. If I don't have (access to) the cash, then I can't do something stupid. I also like sleeping stress free. I remember when I did have a more balanced portfolio, I would stress over the gyrations of the equity portion. Haven't experienced that in many years since bulking up on the fixed income.

Anyhow, I've rambled enough. Thanks for all the replies. Good discussion!