Skip to main content

Warren Buffett and the Bond Market

On, Monday, May 6th, during an interview on CNBC, Warren Buffett, the venerated Chairman of Berkshire Hathaway and famous investor, called the fixed income or bond asset class a "…terrible investment right now".  Obviously, it is important to listen closely to what Mr. Buffett has to say given his investment track record.  However, it is also important to take several other factors into consideration as well, such as:

1.) Mr. Buffett is in a different financial position than probably 99% of us and, therefore, can afford to take a different amount of risk.  This is also likely true for most of the people who earn a living by making financial predictions.

2.) As The Wall Street Journal wrote on Sunday, bond bears were making the same calls in the beginning of 2010, 2011, and 2012; those predictions led to lower yields (e.g., higher bond prices and thus higher bond returns) as the year went on.  If the keep predicting this every year I guess eventually they will get it right.

3.) While bonds may be a "terrible investment right now,” according to Mr. Buffett, that shouldn't mean that if you currently own bonds you should get rid of them at this time because, when the stock market pulls back, and it will, you will be glad you owned bonds.

4.) A "terrible" market for bonds is much better than a "terrible" market for stocks.  One of the worst bond markets occurred in 1994 when the Federal Reserve raised the funds rate from 3.00% in January 1994 to 6.00% in 1995 in quarter percentage rate increments and the bond "market" as measured by the Barclays Aggregate index lost 2.9% where the stock market, as measured by the S&P500, gained 1% in 1994 but lost 9% in 2000, 12% in 2001, 22% in 2002 and 37% in 2008  (Sources: , )

5.) All of Mr. Buffett's investments and predictions, as well as those of most financial market predictors, have not always been correct or made money.  In 2009 his company lost 62% due to their investment portfolio (Source: )

6.) In our opinion instead of trying to guess what the financial markets are going to do, which we cannot control, it is more important to look at your investment portfolio with respect to your goals and the amount of risk you are willing to take and to not to have all your "eggs" in too few baskets.  This is what we help our clients do.

*Please note that it is not possible to invest directly into an index.


Popular posts from this blog


Structured Settlements in A Low Interest Rate Environment

We often hear from our plaintiff attorney clients that their clients should not use a structured settlement annuity due to the current low interest rate environment. Their thought is that their clients can do better in other financial instruments such as the stock market. This logic fails to take into the consideration one of the best features of a structured settlement annuity which is its income tax FREE GUARANTEED payments. I am a financial adviser and Certified Financial Planner with over 20 years of experience who can advise clients regarding ALL financial options and not simply limited to Structured Settlement Annuities. I have witnessed MANY high and low interest rate environments and MANY claimants who were going to "get a higher rate of return" outside of a structured settlement annuity who are now OUT OF MONEY! Remember, it doesn't matter what rate of return you are getting if the balance of your investments is ZERO! But don't just take my word for i

Thomas Bond Benefits of Structured Settlement Video

Please watch this excellent video where e xperienced and successful personal injury attorney, Thomas M. Bond from the firm of Kaplan/Bond in Boston tells you why a structured settlement is the best choice for the longterm financial security for you and your family when your lawsuit settles for a large sum. Hear how one man made the wrong choice and tragically lost everything.