I didn't express very well what I am wondering about. My question isn't whether putting one's money into a bond fund is or isn't a good idea. I have already concluded that it doesn't make much sense.
I am really interested in whether people think Roubini is correct to worry about a shortage of liquidity which could lead to a bond market crash. Roubini expressed the idea that a bond fund investing long, using money that can be suddenly withdrawn by the individual investors in the fund, is really at high risk. i.e Roubini says, in effect, that bond funds are taking short term "deposits" and lending long, which is a classic recipe for big losses if the deposits run out the door. I could ask this as well: I hear on the radio mortgage lenders offering low interest loans for 30 years. I wonder if they are embracing the same risk? I.e. lending long to home buyers but raising short-term money to do the lending. I don't know whether the mortgage lenders are doing that, just wondering about it. Gene On Jun 7, 2015, at 10:54 AM, [email protected] wrote: > "Eugene Coyle" <[email protected]> wrote: > > I've wondered about bond funds. They seem to be some sort of income > averaging device, with little chance for capital gains, and with considerable > risk for a bad outcome. Why not just buy a bond directly? > > Any bond market comments? > > Greece is a good example of a bond market crash. > > If we look at corporate bonds they have various interest rates and various > risks of not paying interest or return of bond price. > > So it makes sense to diversify through the use of bond funds. > > In the US government and corporate bonds are very low priced. Probably the > crises around the world have caused the 30% ownership of US government bonds > and when those crises are eliminated next year US government bonds won't be > so attractive and interest rates will rise regardless of what the Feds do in > the way of quantitative easing. > > -- > Ron > > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
