Gyroscopic Investing

Is anyone rejecting US LTT in favor of blue-chip corporate bonds in the PP. I think HB made reference to this approach, although not endorsing same?

How has this approach worked out in the PP? Are you comfortable using this approach into the future?

I would want to use a fund rather than buy individual bonds, especially really long-duration ones, because corporations can and do default on their debt. The problem with substituting commercial bonds for government bonds is that they respond to much more than just interest rates and changes in the price level; their valuation is inherently tied to the private entity that issued them, so they are more risky and they aren't going to function as a flight-to-safety asset during times of turmoil. When everything's blowing up, people line up at Uncle Sam's bond window, not Google's.

I think this makes sense for someone who morraly objects to loaning money to coercive entities. I would say that owning corporate bonds subjects you to more business/economic risk and you will need more bonds vs. stocks to come close to the volatility of a portfolio with treasuries instead.

Look at the divergence between Long-term treasuries and long term AA corporates in 2008. Pretty significant.

murphy_p_t wrote: Is anyone rejecting US LTT in favor of blue-chip corporate bonds in the PP. I think HB made reference to this approach, although not endorsing same?

I think that's right. I heard it in the radio archives.

Another point is that unlike US Treasuries, long term corporates are almost always callable - so rather than increase as interest rates go down (which is the main point of owning long term bonds) they tend to just turn into cash.  You end up exposed to the downside (value crashing due to rising interest rates) but not the upside.