Book Review: Surviving the Bond Bear Market

This was an interesting book.  It is well written, and I share some of the points of view of the authors.  That said, there are a bunch of things that I take issue with in the book.

The style of the book was engaging.  I liked the way that the authors used two fictional characters, Elvin Greedo, and Neo Fyte, to illustrate the decision-making processes of amateurs.  I particularly appreciated the growth of the lesser/younger Neo, as he worked to learn, versus his initially more smarter/successful brother-in-law Greedo.

There is a problem, though.  This book takes an inflationist viewpoint.  I largely but not entirely share that viewpoint.  There is the bias, commonly stated as “What else can the government do but encourage the central bank to inflate away the debt?

There are other possibilities: the government could raise taxes dramatically and pay off all existing debts/claims.  Or, the government could pay off domestic claims, and refuse to pay foreign claims, or vice-versa.  It depends upon whom they are more afraid.

I think the inflationist view is most likely, but to me it is a two-out-of-three odds.

Thew book takes you through what you would do in order to preserve purchasing power in a bond portfolio through a crisis where there are significant municipal defaults amid inflation.  If that is not the scenario we get, this is not the right book for you.

That said, the book understands the complexities of markets.  Cycles aren’t simple; they don’t occur on schedule, and there are often fake-outs.  That said, the narrative with Neo and Greedo takes place too rapidly.  A crisis the size that the authors are purporting would take longer to play out.

Also, any crisis/recovery might be far more uneven than the book posits.  Think of the ’70s where no one knew what to do.

Quibbles

The book does not discuss the difficulties inherent in inverse and leveraged ETFs, in how they are short-term vehicles that do not necessarily achieve a long term result.

I also did not appreciate the plugs for Marilyn Cohen’s newsletter.  One or two would have been okay, but more is distasteful.

I also found it amusing that the author thinks Wisconsin and Maryland are safe states.  Also that they focus on a few sorts of bonds that are “full faith and credit” of the US government, to the exclusion of others.

I also did not appreciate the nuclear winter rhetoric.  There are things that balance in this world; if China starts selling Treasuries, the dollar will fall, and US exports will thrive.  That is what brings balance.

Finally, I could not use the flash drive that came with the book, which was okay, because I got the data from their website.  The password is in the book.  I did not try out the excel spreadsheet, because I personally don’t have a lot of bonds.  That is another solution to the inflationist problem.  Don’t own bonds denominated in US dollars.

Who would benefit from this book:

Anyone with a big bond portfolio that is sleepy and unconcerned about looming risks could benefit from this book.  The book isn’t perfect, but it will make you think more than most books will.

If you want to, you can buy it here: Surviving the Bond Bear Market: Bondland’s Nuclear Winter.

Full disclosure: This book was sent to me without my requesting it.

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