Bonds

Bonds

I'm looking at somewhere to invest money from the called Fannie Mae bonds, and I am actually disturbed by how high the yields are on not just government agency bonds, but even corporate bonds.

Why am I disturbed? Because a high yield on a bond usually indicates one of three things:

1. There's a non-trivial risk of default.

2. The economy is booming, and interest rates have been driven up by this.

3. There is a high risk of long-term inflation.

Well, we know that #2 isn't true. The economy is not booming. It may recover in the next year or two--indeed, I think that is likely--but it isn't booming right now. Both #1 and #3 are pretty worrisome possibilities.

If we were talking about junk corporate bonds, then #1 wouldn't be concerning. But these are AAA-rated 30 year corporate bonds with average yields of 5.36%. The government agency bonds? Those are averaging 5.51%. If there is a non-trivial risk of the U.S. government defaulting, then you are probably better off investing in cases of 7.62mm NATO and canned food. And Nancy Pelosi (D-Babylon) talking about political violence isn't helping alleviate my concerns.

That's such a scary thought that I have to want to believe that #3 is the real problem: the risk of high inflation, and not just for a few years. Inflation is fine for people that have no assets, and lots of debt--until the inflationary spiral makes their jobs go away. But unless you can find an investment that gets ahead of price inflation, anyone who has any assets at all is going to be in a world of hurt. I'm sure that George Soros and other billionaires leftists have figured out how to profit nicely from this disaster. The rest of us have much to worry about.

Now, if there were a functional Republican Party made up of responsible adults, there might be some hope of both taking both control of Congress and fixing the problems. But I'm afraid that all we can realistically hope for is the first part of that: taking back control of Congress. The corruption of the Republican Party 2002-2006 is unlikely to be corrected just because they kick out the clowns currently up there.

I understand why my ancestors immigrated to Plymouth and Boston in the 1620s and 1630s. The England that they lived in was too depraved a place in which to raise a family. If there were spaceships going off planet right now, I would be sorely tempted.