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Just read his article in Globe & Mail ("Getting uncomfortable with bonds? Hang tough").

There's a fine distinction that's not very clear from the article and perhaps your opinions will bring some light. If I read it correctly, he's arguing in favor of owning bonds in the portfolio (i.e. if you have 'em, keep 'em) for all the usual reasons, but not necessarily for buying them now, given that the interest rates are expected to raise in the second half of this year.

Your thoughts?
 

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I think he is saying that most portfolios should be balanced, as the last few years have shown again that stocks can blow up. The problem is that bonds are bound to get hit by rising interest rates at some time in the next business cycle. So short maturities are best, even if the yield is abysmal. The demand for reasonable yield in the last cycle (2002-7) brought us shaky income trusts (return of capital mascarading as yield) in Canada and mortgage securities backed by sub-prime borrowers in the States, as well as various Ponzi schemes. Chasing yield can be dangerous for your portefolio.

Personally, for the fixed income part of my portfolio, I use convertible debentures under 5 years, rate reset preferreds and covered option writing of blue chip stocks.
 

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speaking of options, jan, what do you make of that colossal iron formation in XIU 2011 and 2012 leaps ... the huge open interest in 14, 16 and 18 calls & puts. I don't know how long it's been there. Lurking like a great white whale underwater.

some institution is calling bigtime for limited upside over next 2 years. But there was a counterparty. Or counterparties.
 

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Personally, for the fixed income part of my portfolio, I use convertible debentures under 5 years, rate reset preferreds and covered option writing of blue chip stocks.
I've utilized the same strategy including rate resets, convertibles, some mid-term corporates, short-term bond etfs, floating rate prefs, and retractable prefs. Staying away from long term bonds, but have a bit of perpetual preferreds. The problem is that I'll have a whack of cash from various maturities around 2014 / 15 / 16 that will have to be re-invested, hopefully with a good ladder strategy to spread out the reinvestment risk. For now, it's all about not losing capital...
 
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