Permanent Portfolio treasurys vs bogle head total bond index

[l82start]

2) Bogleheads usually advise a total bond market fund for fixed income. Browne likes Treasuries only.
3) Bogleheads usually like to keep the fixed income maturity on the short-side (1-5 years). Browne likes to split it 50/50 between very short and long term Treasuries.


This is a common question and I think I can make a good case for why US investors should only own US treasuries for their bond allocation (assuming 2008 didn't teach them this lesson already!).

so the question is ... what are -the pros and cons of total bond vs treasuries
                                        -and the pros and cons of 50/50 short/long vs short term

[MediumTex]

so the question is ... what are -the pros and cons of total bond vs treasuries

Total bond market contains corporates and treasurys, which is going to be riskier than 100% treasuries and may provide a slightly higher return based upon the same duration of bond.

In a deflationary spiral, corporates will get hurt badly, as they did in 2008, while treasurys are likely to do well.

One reason to choose treasurys, too, is they are non-callable, which is nice if one day a 4.5% yield is way above what anything else is paying.

-and the pros and cons of 50/50 short/long vs short term

50/50 short/long treasurys give you a higher yield and the opportunity for capital gains if yields are falling.  100% short term treasurys give you less yield and much less exposure to loss if yields begin to rise.  Short term treasurys provide little opportunity for capital gains in a deflationary environment.

For PP purposes, there are really three possible approaches:

25% ST treasurys and 25% LT treasurys
50% 10 year treasurys
33% LT treasurys if using 33% stocks and 33% gold.

The 25% ST and 25% LT strategy is what HB recommended and I don't see any reason not to follow this approach, all things considered.

[craigr]

The issue with bonds in a portfolio, for me at least, is I own them for a very specific reason: Safety. Especially in unstable deflationary markets. I don't want, nor need, to do speculative activities with my bonds. This is because the time when bonds really outperform other assets is precisely the time when you don't want to have any speculative risk in them (like wide scale credit contraction in the economy bankrupting businesses).

However I think many people get caught up in chasing yield at all costs and forget why it is they own bonds. They start to pretend that bonds are stocks.

But bonds aren't stocks. They have their own unique set of risks: Credit risk and call risk. Two things that you don't want showing up when you are expecting bonds to save the portfolio in a bad economy.

This is why I don't like Non-Treasury bonds. Treasury bonds are unique in that the US Govt. can always print money or raise taxes to pay them off (at least in theory). This means there is very little chance they are going to default compared to non-Treasury bonds. Also there is no call risk which means that if market interest rates fall I don't have to worry about the US Treasury calling back my bonds and forcing me to go out and buy new bonds with a much lower yield (a problem with municipal bonds for instance).

Many of these points I bring up in my Bond FAQ as well.

Now, if you look at the historical returns of Vanguard's Total Bond Market fund vs. An intermediate Treasury bond fund (which is comparable in duration) you find very little difference in returns:

Vanguard Total Bond (VBMFX) 10 year annualized returns: 6.10%
Vanguard Intermediate Treasury Bond (VFITX) 10 year annualized returns: 6.70%

In fact going back to Simba's spreadsheet from 1972-2009 we get a CAGR:

Total Bond Index: 7.81%
Intermediate Treasuries: 7.89%

So there is no historical return advantage in the total bond market vs. intermediate treasuries.

Next though is how the bonds perform when put under pressure. Here I think that Treasuries show their true power. Being Treasuries everyone knows they are the most liquid and risk free type of fixed income you can own. When the markets panic, guess what people want? Treasuries. They don't want mortgages. They don't want corporate bonds. They don't want Junk bonds. Here are some charts showing this difference:

2008 Total Bond Market vs. Intermediate Treasuries:



2008 Long Term Treasuries vs. many others:



US Treasury Long Term Bonds ETF (Ticker: TLT) in red (up about +35%)

Vanguard Investment Grade Corporate Long Term Bonds (Ticker: VWESX) in dark blue (down about -5%)

Vanguard Treasury Inflation Protected Securities (TIPS) Bonds (Ticker: VIPSX) in light blue (down about -7%)

Vanguard Long Term Tax Exempt (Ticker: VWLTX) in magenta (down about -10%)

Vanguard High Yield Corporate Bond (Ticker: VWEHX) in green (down about -30%)

So there is no advantage to non-Treasury bonds in times of crisis.

Well how about extra returns? Sure I guess this is a possibility but you can lose that extra return in a bad market very quickly. Even if extra returns were a selling point, bonds are a really inefficient way to generate returns vs. just owning more stock exposure. IMO. For taxable investors, it's a really bad idea as the extra yield is largely consumed in a higher tax bill. So no joy there, either.

In the end, Harry Browne was right about bonds. You want to own the highest quality you can with no credit risk. Period. That's US Treasuries for US investors. To me, the Total Bond Market fund owns too many types of bonds I don't want to touch and there are no definitive advantages in the number of bonds it does own vs. Treasuries. There is no advantage in historic returns, no advantage for diversification, no advantage in market crises, etc. In the end, Treasuries are just the better way to go.

EDIT: Corrected CAGR figures for 1972-2009.

[pplooker]

One neat thing about the PP mentality is you can be a Boglehead too.  It's just what HB would have called a Variable Portfolio.

The portion of my fixed income in the VP looks like this.

Half in Vanguard Intermediate Bond Index, which is in all honesty half Treasuries and half corporate
Half in TIPS

Then of course in the PP I have the usual four slices naturally including:

25% Long term treasuries
25% Cash (which is technically not fixed income but imho the underlying instruments I use such as I bonds and ST treasuries are close enough)

You'll notice the first two do not follow the PP mindset, the second half does.  Why do I like this?

1. I have no idea what the highest yield in fixed income securities is going to be over the next 30 years.  I have no idea for Variable purposes if I should go long or short in duration, so I settled in the middle.  I use the intermediate index to avoid GNMAs, because I believe that intermediate treasuries produce the same return with less volatility.  I just have no use for them but it’s not a big deal to have them or not have them imho.

2. Most PP followers seem to hate TIPS.  I personally think it’s a toss up what might perform better between gold and TIPS for the intended purpose.  That’s why I do both, that way I’m happy and I make both gold and TIPS lovers mad at me.

3. By mixing the VP and the PP, I have a diversity I like a lot as it sates my desire to invest and speculate as I see fit.  I have I bonds and TIPS, short, intermediate and long term treasuries, enough corporate exposure to possibly enjoy some higher returns but not so much I’m taking on a risk I don’t want, and good liquidity.  It’s all purposeful and useful from my perspective.

Now some people may challenge my underlying assumptions, and that’s fine, this is just what I’ve done after weighing all the choices.  That’s life, we have to make decisions and live with them.  Caveat emptor.

That, and I’m a madman.

But as a digression, really I think there’s no big difference between Bogleheadism and the PP.  Honestly, the decision to save, to invest, to diversify, to not time the markets, etc. are the biggest and most beneficial decisions.  Anything else, while important, is secondary to these underlying principles.  I say they’re more similar than different.

[MediumTex]

Most PP followers seem to hate TIPS.

Let me clarify this point a bit.

I don't think PP-ers hate TIPS in general--rather, I think they do not believe that TIPS are a suitable replacement for gold in the PP structure.

As part of a different allocation strategy where the viability of the whole portfolio is not dependent upon the non-correlations built into the PP (with gold as an integral part), then TIPS might have a strong role to play.  Additionally, in a tax-deferred account, people who buy TIPS and hold them to maturity may be very happy with their returns.

TIPS are one of those things in life that are very unlikely to actually achieve their stated purpose over long periods of time (i.e., providing a reliable inflation-adjusted return), but they may achieve other purposes that nevertheless make them appealing to some investors (e.g., providing some inflation protection over some periods of time).

The key thing to understand about TIPS when viewed from a longer historical perspective is that there is a lot of hubris built into the assumptions on which TIPS are premised.  This hubris is often unconscious to those who believe that certain social and political institutions are permanent fixtures on the human landscape. 

Percy Bysshe Shelley's "Ozymandias" captures the spirit I am referring to in the whole premise upon which TIPS are based.  You have probably seen it quoted before:

I met a traveller from an antique land
Who said: Two vast and trunkless legs of stone
Stand in the desert. Near them, on the sand,
Half sunk, a shattered visage lies, whose frown
And wrinkled lip, and sneer of cold command
Tell that its sculptor well those passions read
Which yet survive, stamped on these lifeless things,
The hand that mocked them and the heart that fed.
And on the pedestal these words appear:
"My name is Ozymandias, king of kings:
Look on my works, ye Mighty, and despair!"
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare
The lone and level sands stretch far away.

This is what I might call "TIPSymandias":

I met a traveller from an antique land
Who said: I have seen a curious bond
This bond made a promise rare among men and kings,
Backed by full faith and credit
The bond made it clear to all who bought, purchasing power is safe
Those who look upon the bond are counseled to take comfort
That which is will always be, a promise made is a promise kept,
And other assorted platitudes and assurances.
On the back of the bond these words appear:
"Inflation is tamed for all time!
Gold is barbarous and obsolete, inflation look upon this mighty bond and despair!"
No record of the issuer of the bond remains. Round the decay
Of this curious promise, boundless and bare
The lone and level sands of change stretch far away.

[l82start]

ok let me try to recap and see if i get this ..

total bond is considered riskier because it has corporates which are not in a opposing asset class making there #2 (lower) risk level invalid in a PP
LT treasury's  are a opposing asset class making them safer for a PP perspective  making there #3 (higher) risk level invalid in a PP

?

[craigr]

I think Tex's point is right on. The issue I have with TIPS (aside from their horrible tax status) is that they are billed as cure-all. Yet in the US they've only been here since 1997 and never through a high inflation period. When I read investment academics telling people to buy 100% TIPS for their savings I shudder. TIPS may be fine but I wouldn't put 100% of my money into anything because there is always the chance a surprise could happen.

As for TIPS in the PP over Gold. Well it just doesn't work well because the portfolio wants assets that are volatile. It seeks them out specifically to be volatile for particular economic situations. Gold is volatile because it is extremely allergic to high inflation or expectations of inflation. TIPS will probably keep up with inflation + real rate of return at best. I just don't see TIPS having the explosive growth gold will if very high inflation returns to the US. That explosive growth is what the PP needs to offset losses in other assets (especially LT bonds) when needed.

[craigr]

ok let me try to recap and see if i get this ..

total bond is considered riskier because it has corporates which are not in a opposing asset class making there #2 (lower) risk level invalid in a PP
LT treasury's  are a opposing asset class making them safer for a PP perspective  making there #3 (higher) risk level invalid in a PP

?

Treasury bonds are safest because they have no credit risk. A 1930s style deflation can make corporate debt very risky due to defaults. The govt. has a very low chance of default compared to a company.

Also let me just say that I don't think Total Bond Market is risky in the true sense of the word.  It is very widely diversified. But in terms of bonds it is riskier than owning Treasuries.

Total Bond Market also owns mortgages which behave differently than nominal bonds. Essentially, mortgages have a built in "call" option because when market rates decline the owners of the mortgages tend to want to refinance to a lower rate to save money. So in a bad deflationary market investors could see mortgage fund yields fall as old mortgages are refinanced to newer lower yielding ones.

Some advisors tell people to diversify into junk bonds and emerging market debt. I think this is just all around bad advice and shouldn't be done except for a speculative investment. If you need to risk higher returns that badly I'd just tell you to overweight more stocks because it is the most efficient way to try to gamble for extra returns.

[l82start]

so how does vanguard get risk numbers that are the opposite of what you are saying?
is it because they calculate diversity in the "total bond" as reducing the risk, and LT is all LT so has less diversity?

[craigr]

so how does vanguard get risk numbers that are the opposite of what you are saying?
is it because they calculate diversity in the "total bond" as reducing the risk, and LT is all LT so has less diversity?

I don't know how risk numbers are calculated for any asset. It's all arbitrary. There were some money market funds prior to 2008 with low risk numbers that completely blew up during the credit crunch. So I don't put much faith in risk numbers.

They may be comparing the bond fund's volatility against their other offerings to get a risk value. However, I think Treasury bonds are the lowest risk bonds you can own in the US. No company can print money and tax people to pay their creditors like the US Govt. can if needed.

[pplooker]

That explosive growth is what the PP needs to offset losses in other assets (especially LT bonds) when needed.

But just to pick a fight here...

That whole argument basically stems on A) reliance on past performance being indicative of the future (guilty of this myself many times over) and B) predicting what policies the government will set regarding TIPS.

That, and a small real return over inflation is all I want TIPS to do.  More would be nice I suppose.  There have been very long stretches of time that the price of gold has performed very similarly or worse after all.  How do I know that in my lifetime I won't see a time when gold doesn't counter inflation?  It sounds crazy but as a thought exercise it's certainly valid, considering that gold is one asset class which has been taken away from us or otherwise restricted for much of American history.

I personally am God awful at predicting either the price of gold or the performance of TIPS.

[craigr]

That explosive growth is what the PP needs to offset losses in other assets (especially LT bonds) when needed.

But just to pick a fight here...

That whole argument basically stems on A) reliance on past performance being indicative of the future (guilty of this myself many times over) and B) predicting what policies the government will set regarding TIPS.

That, and a small real return over inflation is all I want TIPS to do.  More would be nice I suppose.  There have been very long stretches of time that the price of gold has performed very similarly or worse after all.  How do I know that in my lifetime I won't see a time when gold doesn't counter inflation?  It sounds crazy but as a thought exercise it's certainly valid, considering that gold is one asset class which has been taken away from us or otherwise restricted for much of American history.

I personally am God awful at predicting either the price of gold or the performance of TIPS.

Well here's the deal for me. I don't expect to make a killing on gold. In fact, I'd rather not make any money on it at all. That would mean the economy was sound and my money was not becoming worth much less due to inflation. The way to generate real returns is from assets that produce income such as stocks and bonds. Gold cannot grow on its own the way stocks and bonds can. Yet stocks and bonds have a really tough time when the value of the money is falling rapidly. The 1970s stagflation episode comes to mind. From the late 1960s to early 1980s stocks had no after inflation real growth. It was almost 15 years before they were able to start producing above inflation returns again. It was gold that saved a portfolio during this time.

Yes we are relying on past performance of gold vs. inflation. But we have a really long track record of gold protecting against inflation vs. TIPS which have a little more than a decade of existence here in the US. So for me, I just trust gold to keep doing its thing when bad inflation is raging.

Also, I just don't like buying inflation insurance from inflationists. That's basically what TIPS are. The same group causing the inflation is then expected to tell me what the rate of inflation is and what the inflation adjustment will be. It's a conflict of interest and I'm just not that trusting.

[MediumTex]

That explosive growth is what the PP needs to offset losses in other assets (especially LT bonds) when needed.

But just to pick a fight here...

That whole argument basically stems on A) reliance on past performance being indicative of the future (guilty of this myself many times over) and B) predicting what policies the government will set regarding TIPS.

No, the argument is not about that.  With respect to the PP, TIPS don't give you enough volatility to replace gold.  The rest of the TIPS discussion is interesting, but moot.

That, and a small real return over inflation is all I want TIPS to do.  More would be nice I suppose.  There have been very long stretches of time that the price of gold has performed very similarly or worse after all.

That's not correct.  TIPS have only been around for 13 years, so there is no long stretch of time over which to evaluate the performance of TIPS relative to gold.

How do I know that in my lifetime I won't see a time when gold doesn't counter inflation?  It sounds crazy but as a thought exercise it's certainly valid, considering that gold is one asset class which has been taken away from us or otherwise restricted for much of American history.

Who knows what will happen in the future?  That's the bet that is implicit in the structure of the PP.

It was illegal for private citizens to own large amounts of bullion from 1933 to the mid-1960s when private ownership became very common before becoming explicitly legal a few years later.  If our nation is 235 years old and gold ownership has been restricted (though never prohibited) for a little over 30 years, that's not "much of American history."  Consider, too, that in a fiat regime the whole concept of restricting gold ownership doesn't make any sense.  FDR's gold confiscation was designed to facilitate a dollar devaluation when there was a gold peg.  Without a gold peg you are trying to defend or devalue against, I don't know why the government would care who wanted to own gold.  Think about it.

I personally am God awful at predicting either the price of gold or the performance of TIPS.

Then you will love the PP, because it doesn't ask you to predict anything.  Just follow the recipe and enjoy other pursuits without being distracted by the markets.

[pplooker]

No, the argument is not about that.  With respect to the PP, TIPS don't give you enough volatility to replace gold.  The rest of the TIPS discussion is interesting, but moot.

Well let's get back to square one.

1. I agree that TIPS aren't part of the PP strategy.

2. I assert that TIPS are a viable part of a VP strategy in which TIPS may not have to be able to "spike" like gold.

3.  The OP asks why the PP long bonds instead of the Bogle esque bond index.  I'm merely pointing out that one doesn't have to do one or the other, you can have both if it pleases you.

That's not correct.  TIPS have only been around for 13 years, so there is no long stretch of time over which to evaluate the performance of TIPS relative to gold.

Clarification: the expected behavior of TIPS is quite typical of what gold effectively returns most of the time: a small real return over inflation.

Who knows what will happen in the future?  That's the bet that is implicit in the structure of the PP.

It was illegal for private citizens to own large amounts of bullion from 1933 to the mid-1960s when private ownership became very common before becoming explicitly legal a few years later.  If our nation is 235 years old and gold ownership has been restricted (though never prohibited) for a little over 30 years, that's not "much of American history."  Consider, too, that in a fiat regime the whole concept of restricting gold ownership doesn't make any sense.  FDR's gold confiscation was designed to facilitate a dollar devaluation when there was a gold peg.  Without a gold peg you are trying to defend or devalue against, I don't know why the government would care who wanted to own gold.  Think about it.

Respectfully sir you are only referring to the single most egregious act of regulation.  You are forgetting the many other government efforts which impact the gold supply, such as the Mining Law of 1872.  Laws regulating gold as legal tender and the exchange rate to the dollar go as far back as 1792.  While a good many of these laws are relatively benign, laws affecting how much gold the public has access to, and how they can claim ownership of gold, go back quite a ways.  Would they do that now?  Probably not but I don't know that.  I do know we have a cash strapped, desperate government.  If they think they can get money somehow, I put nothing past them.

Then you will love the PP, because it doesn't ask you to predict anything.  Just follow the recipe and enjoy other pursuits without being distracted by the markets.

I pretty much ignore the market anyway, just rebalance and go on.  While this is an attractive feature of the PP it's not the only strategy that works on this principle.

[MediumTex]

That's not correct.  TIPS have only been around for 13 years, so there is no long stretch of time over which to evaluate the performance of TIPS relative to gold.

Clarification: the expected behavior of TIPS is quite typical of what gold effectively returns most of the time: a small real return over inflation.

Perhaps, though there is no precedent in history for an inflation-adjusted bond surviving any serious inflation.

The key difference, in my view, between TIPS and gold is that when the sovereign entity is overtaken by the entropy of human social evolution gold remains, while all sovereign commitments are quickly forgotten as the affected society re-orients itself (Greece is probably going to be the example du jour).

With all that said, I'm not opposed to TIPS as part of a VP or as part of an approach that has nothing to do with the PP.  I just think that there is a casual acceptance of the whole concept behind TIPS that may one day look a bit naive.

[pplooker]

You know that's an interesting question for anyone who may happen to know: how have the UK issued inflation indexed bonds performed relative to their benchmark?  Granted they've only been around since 1981 to the best of my knowledge, but that's longer than 1997.

EDIT: pplooker. Sorry but I accidentally modified your message instead of quoting it for my reply! I lost most of your original post. Very sorry!

[craigr]

You know that's an interesting question for anyone who may happen to know: how have the UK issued inflation indexed bonds performed relative to their benchmark?  Granted they've only been around since 1981 to the best of my knowledge, but that's longer than 1997.

There have been inflation indexed bonds available at one time or another for centuries. If I recall one of the companies in colonial US was the first to issue them.

But here's a problem for me. The inflation indexing only protects that portion of your portfolio that is inflation indexed. The rest of the portfolio will be vulnerable to inflation.

If you hold 25% of your allocation to TIPS, it may be that the TIPS keep up with inflation plus a couple percent for your trouble. But what about the other 75%? Is that part being ravaged by inflation and treading water or worse? The TIPS appreciation wouldn't be enough to stop the damage across the entire portfolio.

That's the difference that gold has provided. The price increase in gold has usually been enough to offset, or at least significantly reduce, real losses in other parts of the portfolio.

Further, we saw in Spring of 2008 five year TIPS yields go negative:

http://www.marketwatch.com/story/inflat ... oing-yield

This is interesting because what it shows me is there is an inherent price ceiling in TIPS that gold does not have. How high can the price of TIPS on the market go once the yield goes negative? For those that hold TIPS, will the CPI adjustments really reflect what the markets think the CPI will be? That's where the trust factor comes into play.

Re: Personal rate of inflation.

You're right. My personal rate of inflation has not gone down either. I pay more for fuel, health insurance, property taxes, etc. than I did five years ago. My CPI is not negative.

[Roy]

You know that's an interesting question for anyone who may happen to know: how have the UK issued inflation indexed bonds performed relative to their benchmark?  Granted they've only been around since 1981 to the best of my knowledge, but that's longer than 1997.

But here's a problem for me. The inflation indexing only protects that portion of your portfolio that is inflation indexed. The rest of the portfolio will be vulnerable to inflation.

If you hold 25% of your allocation to TIPS, it may be that the TIPS keep up with inflation plus a couple percent for your trouble. But what about the other 75%? Is that part being ravaged by inflation and treading water or worse? The TIPS appreciation wouldn't be enough to stop the damage across the entire portfolio.

That's the difference that gold has provided. The price increase in gold has usually been enough to offset, or at least significantly reduce, real losses in other parts of the portfolio.

Further, we saw in Spring of 2008 five year TIPS yields go negative:

This is interesting because what it shows me is there is an inherent price ceiling in TIPS that gold does not have. How high can the price of TIPS on the market go once the yield goes negative? For those that hold TIPS, will the CPI adjustments really reflect what the markets think the CPI will be? That's where the trust factor comes into play.

These are good points not typically discussed.  Clearly the portfolio weighting to TIPS ("insurance") matters greatly to the portfolio returns.  Theoretically, it would likely provide adequate insurance if the TIPS percentage was high (say, 70% of the portfolio) but that carries other consequences and concerns.  (Larry's strategy makes more sense because that is precisely what he does—but not for everyone, clearly.)

I believe Gilts have worked as advertised, and Brazil (I think) has had some success with inflation-indexed securities, though I don't think Britain experienced hyperinflation as in the US, though Brazil may have had serious inflation...

In 2008 we had big liquidity issues and some major institutional players dumped TIPS en masse. This confused many investors who depended on their negative correlation occurring at that time. Of course, negative correlation refers to "tendencies" not absolutes!

And while Gold itself treads water with inflation over the very long term, it has demonstrated powerful effect during rampant inflation years—enough to carry the PP with just 25% weighting.  Having 25% in ST Treasuries (or better yet, shorter duration MM) allows a reasonable PP response to inflation combined with the Gold (LT Treasuries would likely suffer and Stocks may suffer, both depending on the degree of inflation.) Before the increase in TIPS popularity, many viewed T-Bills as a decent hedge.  And some still prefer the liquidity and fast rollover the much-maligned T-Bills provide.  But again, as Craigr stated, one always needs to consider the relative weighting in a portfolio.

With the PP I would not worry too much about TIPS, and for me, it hardly seems useful for the speculative variable portion.  For conventional portfolios, TIPS are worth far greater examination.  Just my take on comparative approaches, though.

Roy

[pplooker]

Further, we saw in Spring of 2008 five year TIPS yields go negative:

http://www.marketwatch.com/story/inflat ... oing-yield

This is interesting because what it shows me is there is an inherent price ceiling in TIPS that gold does not have. How high can the price of TIPS on the market go once the yield goes negative? For those that hold TIPS, will the CPI adjustments really reflect what the markets think the CPI will be? That's where the trust factor comes into play.

Re: Personal rate of inflation.

You're right. My personal rate of inflation has not gone down either. I pay more for fuel, health insurance, property taxes, etc. than I did five years ago. My CPI is not negative.

This all raises another interesting point, even for VP purposes I personally don't go all TIPS as many advocate.

I've settled on half TIPS, half nominal to try to avoid situations like that so the fixed income side of the VP is always returning something.  While this may or may not be wise, the underlying assumptions I've made for Variable purposes is that the gains on the equity side will eventually outstrip inflation as well (i.e. I am making the bet that there will be more prosperity than inflation or other such adverse conditions in my lifetime).  But there I'm guilty of the crime of relying on past performance, but I know I'm not the only one.

[pplooker]

The UK government has made retrospective changes to tax rules in the past.  If it gets desperate enough i.e. hyperinflation it would probably whip away the inflation protection just when you needed it the most.

http://www.investorschronicle.co.uk/Mar ... -gilts.jsp

Now those are very interesting links.  Thanks Clive.

I will make one caveat though.  I try not to make decisions based too much on what governments might do, if that makes any sense.  That's not to say I don't speculate at all about what public policy will be in the future, just that I draw a line somewhere.

It is possible for instance that the tax protection afforded by a Roth IRA will be stripped away.  It's an often flouted and well feared possibility, but I see no immediate reason to ever think it will happen and I've a Roth IRA anyway.

[ochotona]

This is a nice bond thread that deserves to be dusted off and looked at by those who wonder "Treasuries or Corporates?"

[mathjak107]

as i stated in another threat , a total bond fund does not have enough gain potential in a flight to safety to fly fighter cover over a portfolio.

maybe a total bond fund will be up a bit in a flight to safety or maybe it won't be down as much as stocks but in either case  it is not designed to protect and lift  an equity portfolio by more than stocks might fall.

[MediumTex]

as i stated in another threat , a total bond fund does not have enough gain potential in a flight to safety to fly fighter cover over a portfolio.

maybe a total bond fund will be up a bit in a flight to safety or maybe it won't be down as much as stocks but in either case  it is not designed to protect and lift  an equity portfolio by more than stocks might fall.

Yes.  Most total bond funds are designed to dampen volatility, while the PP investor wants as much volatility as he can get in his long term bonds.