CHAPTER 1

Bonds

THE BETTER INVESTMENT

Watching your stocks all day long is amusing up to a point, but income is the thing if you’re shopping for anything from pajamas to pastrami sandwiches.

—Joe Mysak, Bloomberg columnist

For generations, stocks have gotten top billing over bonds. Stocks, many insist, have outperformed bonds in the past, will outperform bonds in the future, and are not risky if held for 10 years or more. We believe these assertions are myths. In fact, this thinking is now being called into question by sophisticated market players such as Citigroup. Citigroup Global Markets published an article dated September 1, 2010, entitled “The End of a Cult.”1 The article points out that from 1950 to 1999 global pension funds and individual ...

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