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Book Review: Bonds are not Forever

Bonds-are-not-Forever

This is a good book, it is not a great book like The Hedge Fund Mirage.  Why?

There are a few reasons.   First, the book on hedge funds contradicted the conventional wisdom.  This book confirms the conventional wisdom that interest rates have to rise.

We all have to be wary of the conventional wisdom in economics.  Economics is a social science, but I mean it not in the sense that we study society, but that economists toe the line as to what is acceptable to publish.  This is guarded by peer review, which ensures that no new idea that might be correct gets published.  (This is true of most of the “sciences” because many “scientists” are not neutral observers — they have axes to grind.)

This book assumes that the US will inflate its way out of this crisis.  In the  Great Depression, it did not work that way, though many thought it would.

The book correctly calls out all of the ways that Wall Street cheats individual bondholders, particularly structured notes, and the illiquidity of muni bonds.

He does not get how muni bond ladders are durable investments, being a good compromise on how to avoid interest rate risk.  Further, he never mentions how the TRACE system of FINRA reports all trades.  The system is not that opaque.

This is a good book, but not a great book.  Yes, I think inflation is more likely than deflation, but I don’t think inflation is a slam-dunk.  We haven’t had it yet amid many predictions for it.

Quibbles

Already expressed.

Who would benefit from this book: It is a good book, though I doubt that the theory is certain.  If you want to, you can buy it here: Bonds Are Not Forever: The Crisis Facing Fixed Income Investors.

Full disclosure: The publisher sent me the book after asking me if I wanted it.

If you enter Amazon through my site, and you buy anything, I get a small commission.  This is my main source of blog revenue.  I prefer this to a “tip jar” because I want you to get something you want, rather than merely giving me a tip.  Book reviews take time, particularly with the reading, which most book reviewers don’t do in full, and I typically do. (When I don’t, I mention that I scanned the book.  Also, I never use the data that the PR flacks send out.)

Most people buying at Amazon do not enter via a referring website.  Thus Amazon builds an extra 1-3% into the prices to all buyers to compensate for the commissions given to the minority that come through referring sites.  Whether you buy at Amazon directly or enter via my site, your prices don’t change.

 

 






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One Response to Book Review: Bonds are not Forever

  1. […] A review of Bonds Are Not Forever:  The Crisis Facing Fixed Income Investors by Simon Lack.  (Aleph Blog) […]

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David Merkel is an investment professional, and like every investment professional, he makes mistakes. David encourages you to do your own independent "due diligence" on any idea that he talks about, because he could be wrong. Nothing written here, at RealMoney, Wall Street All-Stars, or anywhere else David may write is an invitation to buy or sell any particular security; at most, David is handing out educated guesses as to what the markets may do. David is fond of saying, "The markets always find a new way to make a fool out of you," and so he encourages caution in investing. Risk control wins the game in the long run, not bold moves. Even the best strategies of the past fail, sometimes spectacularly, when you least expect it. David is not immune to that, so please understand that any past success of his will be probably be followed by failures.


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