So, what about Treasury securities? They're characterized as super safe in The Wall Street Journal. They have anchored most retirement portfolios for most of the past four decades. How do you analyze that? One way of looking at it is to observe that over the course of 150 years of the national history, bonds have tended - tended - to move over the course of decade-long cycles. Interest rates will rise for 30, 40 years, and fall for 20, 30, 40 years, and so on, starting from the late 19th century to the present. They have fallen for 40 years since 1981. Now, it might be that that cycle has broken... If indeed the cycle has ended and rates are going to go up, we are in a different investment world because bonds will not provide the hedge that they have against falling stock prices.
Just recollect that for everyone's investment memory really, when stocks got into a rough patch, you had some protection from falling interest rates and rising bond prices. But if bond prices are falling and interest rates are rising, you are forever not getting a hedge, but rather a drag. So the 60/40 portfolio or the 70/30 portfolio is not the thing for you. Now this is still speculative, but I think that is likely to be the case and people ought to be alert to the idea that something new is in the offing. And what the something might be is kind of in the womb of time, but we can guess a little bit about it. It might be that... stocks are going to become more important after they reach a point at which they become truly cheap. It might be that cash, for all the damage that inflation does to cash, that cash is going to be the thing, rather than long-dated bonds. So one would have a 60/40 or a 70/30 portfolio, but the 30% or 40% portion would be in a near-cash thing.
~ Jim Grant, interview with William Green, 1:05:55 mark, August 20, 2022
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