Approaches like the “Golden Butterfly” ignore macro issues like the consequences of the 1983 and later distortion of the bond market.
It took forty years to unwind the huge run up in bonds that resulted from Volcker’s moves to stomp out Stagflation, but stomp it out he did. During that forty year period owning bonds has been profitable, as the ever decreasing price of bonds meant your old bond was worth more than its face value.
What the Fed is doing now is minuscule relative to Volcker’s moves.
My point is that for now bonds are a no-person’s land until the Fed stops its current actions of increasing interest rates. Once it’s obvious that the coast is clear there will *eventually* be a long-term decline from whatever peak the Fed finally gets to, but the profitable period for owning bonds might start five or more years from now.
Approaches like the “Golden Butterfly” ignore macro issues like the consequences of the 1983 and later distortion of the bond market.
It took forty years to unwind the huge run up in bonds that resulted from Volcker’s moves to stomp out Stagflation, but stomp it out he did. During that forty year period owning bonds has been profitable, as the ever decreasing price of bonds meant your old bond was worth more than its face value.
What the Fed is doing now is minuscule relative to Volcker’s moves.
My point is that for now bonds are a no-person’s land until the Fed stops its current actions of increasing interest rates. Once it’s obvious that the coast is clear there will *eventually* be a long-term decline from whatever peak the Fed finally gets to, but the profitable period for owning bonds might start five or more years from now.