You just don’t know what will happen. I posted a response to the Diehards forum already that you will probably see. But my answer here is you should stick to the plan. LT Bonds are down something like 20% this year which stinks. But the portfolio actually has a slight gain due to the increase in price of stocks and gold.

At any one point in time you’re always going to find an asset in the portfolio that is “too expensive”. But the problem is it could always go higher. I posted at the Diehards about a person asking a question in one of Browne’s shows complaining in 2004 that LT bonds were only yielding about 6%! He thought for sure the rates were going to go much higher. Well if he had purchased those bonds at about 6% they’d have gone up substantially in price rolling in to 2008.

Now I’m not predicting what is going to happen. Interest rates could very well go up and bonds could lose money. But if this were to happen in a sharp inflation-induced manner then it is likely the gold would offset the losses.

There are no guarantees of course, but I feel strongly that if you don’t own the entire allocation or you mess around with it you can leave yourself exposed to particular risks.

But if you feel strongly about it, then you may want to consider parking the money in a solid treasury money market fund and slowly buying into the bonds. You just have to be unemotional about it so you don’t change it into a market timing maneuver. In the Fall of 2008 for instance LT Bonds went up 30-40% in a matter of weeks. People trying to time the bond market missed out on a tremendous run up in price.

This is the risk you take whenever you deliberately underweight any part of the portfolio. There is always the chance that by not owning an asset it surprises you with good gains just when you need it most.

You convinced me of the merits of Treasuries versus Munis. I did my own research after you showed the TLT vs. Vanguard Muni chart so I could really believe what still does not make sense. Cognitive dissonance I guess.

What do you think, in this environment and with 50% of my money in SHY, moving half of this to 10 year Treasuries instead of 30 year because of the sheer volume of Treasuries flooding the market? I know this goes directly against the theme of the PP, but this level of debt is really unprecedented outside of WWII and people accepted lower rates then because it was patriotic to do so. I doubt the Chinese and Japanese governments feel the same sense of patriotism!

Ray