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The notion that you should own any bonds, let alone more as you age, is nuts in 2021.

Posted by John T. Reed on

Rebalancing is an issue investors seem insufficiently aware of. You ought to decide on what diversification you want in your net worth investment categories. A percentage for real estate, a percentage for stocks, and so on.  Then you check from time to time because it gets out of whack. When it is out of whack, you sell the over percentage assets and buy the under represented assets.
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A person I know showed me their 401(k) list of assets and the percentage of each. I told them to zero the US bonds, foreign bonds, and “emerging” nations. “Emerging” nations to me are corrupt, dysfunctional, family businesses. 
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Bonds
of all currencies are exposed to inflation risk in the currency in question. Bonds denominated in the currencies I recommend—AUD, CAD, CHF, DKK, GBP, NZD, SEK—are, in a sense, the same as the currencies with regard to inflation risk, but the currency is more liquid than the bonds so you could get out of them faster. Plus, in the 401(k), they do not tell you which currencies the bonds are denominated in.
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Another person I know has a “target life cycle fund” 401(k). Jesus H. Christ on a crutch! Virtually every day you are warned about the increasing danger of inflation or hyperinflation. Right?
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Why in the name of God would any sane human being own a bond? Virtually all U.S. financial advisors say you should always have bonds in your portfolio and that the percentage of bonds should increase as you age. Are those advisers working off textbooks written in 1935? Bonds were great during the Depression, but that is the opposite of the current danger.
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Who were the biggest losers in hyperinflation in Austria, Germany and Hungary in the early 1920s? Seniors because they owned government bonds and annuities which became worthless. Also among the worst hurt were conservative investors like banks, insurance companies, and non-profits who regarded bonds as safe. In hyperinflation, bonds and annuities—like Social Security and pensions including military pensions—become worthless and they stay worthless when the inflation ends. “Safe” and “worthless” are 180º contradictions in terms.
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Owning a bond is another way of saying, “I am certain there will be no inflation in the foreseeable future.” I am available to testify for your children who want to have a court appointed guardian put in charge of your financing because you are so terminally stupid as to rely on bonds and pensions in 2021 in America. There are plenty of other asset categories. The notion that you MUST have some bonds in 2021 America is mindless.

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