Contrarian Value Ideas

[gfp927z]

Derf, >> bonds <<

Yes, it's tough to figure a bond strategy these days. With rates falling, the temptation is to go for longer term bonds. But with the growing US debt bomb (37-38 tril and counting), I figure we could have until the national debt hits the $50 trillion mark before things really start unraveling (or could be sooner). If it reaches 50 trillion by 2033, that means bonds to be held to maturity should mature in less than 8 years. To be safe, I've been figuring 5-6 years. For trading though, 10-15 year maturities should produce a nice capital gain as % rates fall.

Anyway, a lot of guesswork, and if Trump's tariffs send inflation soaring, the Fed has to go hawkish, and the bond rally reverses.

Fwiw, my solution has been a 3 year bond ladder, with an added component of longer term bonds via the Vanguard Balanced ETF (VBIAX). This has approx 38% in bonds, with an average maturity of 9.4 years. So it's one way to get some longer duration to lock in, and should produce a cap gain as rates fall. Or just getting some individual 5-10 year maturity bonds is another idea. The 20-30 year bonds seem too risky imo, with so many countries moving away from US Treasuries. So I'm thinking 10 year max.for trading, and 5-6 years max for holding to maturity. But plenty of wildcards out there to throw a wrench in.

Btw, I've been tracking the 2 and 10 year Treasury rates for several years (link below, see I-Box) -


https://investorshub.advfn.com/Bonds-and-Fixed-Income-31578





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