2012-03-18blogspot.com

... it seems to me a bond investor is almost better off in cash. If you were to go out 10 years in a US treasury security you earn yield of approximate 2%. To remain in cash and be flexible you sacrifice those 2%. The bond market is a desert of value.

Ah Jimmy boy; wish you would have just come out and said it: Treasuries actually carry a distinct sort of additional risk that cash does not: DEFAULT RISK. When you carry cash, it's not just for the "flexibility" (after all, Treasuries can easily be sold in the secondary market at any time), but to escape default risk. We can hardly ignore this factor, now that the process of credit downgrade of the US has already begun.



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