Why Invest in Bonds
So the main factor that determines whether a bond is a good deal or not is the value of what you’ll get paid back in. I got involved in the bond market in the first place because I only wanted to take equity risk and make a big bet on the belief that I’d get paid back a lot of money. If I don’t have that, I’d just as soon have a nice safe place to lend my money.
I mentioned this earlier - we want to invest the way rich people invest, knowing that we deserve a good return on our money. That’s the purpose of my strategy to get into bonds. I didn’t like the stock market, I didn’t like the odds provided by the stock market, and so I decided to be a lender rather than an investor. I know that no matter how tough it is to compete, the one thing all those competitors want is capital.
The people who use cheap labor and work harder and bootleg your software - all those people are surrounded by growing numbers of your competitors, but the one thing they absolutely need is money. How is it that they can look to us for money? Because only in the United States (and to a lesser degree in Western Europe) have we been spending the last half-century creating a surplus.
Everyone else was basically working in the fields; they have no surplus, they need our capital. And they’re going to have to pay for it, because there may be plenty of cheap products and plenty of cheap labor in the world all competing, but the global economy is dependent upon one thing and that’s having enough working capital.
My strategy is about providing myself with wealth in the future and protecting myself from the purposeful debasement of the dollar. And I believe that those who aren’t prepared are going to suffer a sudden decline in wealth that is comparable to, or maybe worse than, September and October of 2008 when the bottom dropped out of the stock market. In this case, I believe the drop is going to be in the value of the U.S. dollar, and I don’t want to lose half my wealth, so that’s the focus of my long-term strategy. It’s not possible for me to invest in something for safety, without having this issue of the declining dollar well in hand.
*Excerpts from "A World without Borders" by Dan Frishberg
