When stocks yield as much as bonds, you get the growth free.
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With stocks, you have to worry about the market. With debt, I just have to understand the contract. If my analysis is right, I’ll make money.
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I always look for red flags. My major red flag all the time is when long governments yield 600 basis points over the yield on the S&P 500. At that point, stocks have always been overpriced.
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My approach to bonds is pretty much like my approach to stocks. If I can’t understand something, I tend to forget it.
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Discrepancies — and hence opportunities — in securities originate most often when events move faster than quotations.
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A cheap stock can stay cheap forever, but if you own a bankrupt bond, the process of emerging from bankruptcy and distributing new securities offers a practical catalyst to realize the value.
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Investing is buying a fractional interest in a business and buying debt claims on a business.
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While we can learn from the long run about how bonds and stocks respond to changing environments and to each other, the long run can tell us perilously little about what kinds of environments lie ahead.
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People worry about the riskiness of stocks, but bonds can be just as risky.
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Long-term bonds can be almost as volatile as stocks. They have their own corrections.
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If you think Treasuries have no risk and high yield bonds have risk, the yield spread is there to compensate for the bearing of that incremental risk. The question is whether it is adequate.
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It is an axiom of investment that securities should be purchased because the buyer believes in their soundness, and not because he needs a certain income.
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