How safe is the Corporate Bond Market for your RetireFund?

Bonds are Safe!  Bonds are where you put your money when stocks begin to swoon!

At least, this is the general consensus after 20+ years of a Bond bull market (and all the marketing info pumped into our heads by the investment community)

However, things have changed in the Corporate Bond Market, (and treasuries) and not for the good!

Besides al the talk of trade wars, and the coming worldwide Debt bomb, Investors already wary of a bubble in Treasuries should also be aware of what is going on in the "Corporate" Bond market now!

There are now over $52 Trillion dollars in Corporate Bond issues, over twice the amount there was in 2008 before the financial crisis. According to a recent Bloomberg analysis, "The duration of (those) $52 trillion of Investment-grade bonds now stands at 7"!

That means, if rates rise 1% these bonds would lose 7% of their market value. A 1/2 % point jump would be 3.5% or a 1.8 Billion dollar loss.

With interest rates near all time lows, after a 20 year bond bull market, it maybe time now to re-evaluate your bond positions, especially if you are nearing retirement.

 Also, if you are considering the U.S. Treasury bond funds, then consider this chart AND the fact that all funds charge a fee, every single year, to hold them.

No one, especially this writer, has a crystal ball, however, if you are in or approaching retirement, in the USA or Canada, then you should pay attention to these developments.

Oh yes, pay down and pay off your own debts. Your Retire Fund will thank you for it!

Individual Stocks or Index Funds - 2019 may be a pivotal year!

Picking Stocks VS Index Funds in 2019

2019 does not bode well for Stock Indexes and therefore, Index funds.  Buying Index funds has been the go-to investment of individual investors (and some institutional investors) for years now.  Since 2009, many have done very well with this simple strategy which has outdone many money managers over that time.

2019 may be different for a number of reasons! This bull market we have enjoyed since 2009, is getting very long in the tooth and 2019 is beginning to look like the end is in sight.

The macro picture is a mishmash of poor decisions and poor leadership from Central Banks and world leaders alike. The news is dominated by trade war talks, Walls, Brexit, German (read Euro) downturn, and Debt, beyond anything we have witnessed in the past. Real war cannot be dismissed either as the USA and North Korea are at a stalemate, and (nuclear armed) India and Pakistan are shooting down each others fighter jets, to the cheers of their domestic audiences.

With Britain on the verge of a "no deal" Brexit, Italy may be becoming a financial basket case, German output is inching into negative territory, and in France, the Macron government has done nothing to right that ship.

Some believe that, Deutsche Bank may well be the "Lehman Brothers" of the Euro zone this year as creditors close in and a bailout partner is not in sight. The two largest economies on the planet, USA and China are at serious odds over trade AND both are in serious DEBT!

As the USA begins to withdraw from the world under this administration, it owes $22 Trillion dollars and that debt is now growing at 1.5 Trillion per year under Trump.

There are two ways to handle such a debt burden, 1: Default
2: reduce the dollar to a nickel.  There is no other way to pay down such a massive debt! (my bet is that, if it were entirely up to Mr. Trump, he would pick door number 1)

There are now more refugees on the move across the world than WW2 and most countries are putting up barriers to entry. Euro zone countries from Spain to Greece are doing whatever they can to keep out refugees, instead of welcoming them. Climate change, inept governments and wars are the reasons for such a migration.

Witness the debacle in the USA on the southern border as this president continues to threaten to shut down government if he does not get his wall. This argument is a hideous sidelight to what is truly going on in the world. This same administration seems to admire despots while scorning democracy, whether it is in it's own constitution or that of valuable allies.

The USA has now walked away from trade agreements, peace treaties and most recently, a nuclear arms agreement with Russia. None of these things bode well for markets, or indeed, humanity, going forward, but the pied Pipers of Wall Street keep on playing!

On a lesser, and personal financial note, while most index funds have very low fees, they are paid annually, and therefore, add up over time, eating into profits.  As the value of your investments go up, so do your fees. This is a built in strategy that will eventually eat away at your gains. If these investments go down, the fund still gets paid, every year!

Conversely, Buying individual stocks is now usually done online for less than $10 per trade! (One time). When an index tumbles, not all stocks are included. Some stocks actually go up at such times.

 The drawback:

Now you have to do homework!  Stocks are not index funds! They require you to do some investigating of your own, unless, of course, you want to keep all your money in cash, gold and silver, and buried in your back yard!