Bonds

“Regardless of yield, when investments are absent of value, cash is always a better option than permanently losing money.”

“When stocks yield as much as bonds, you get the growth free.”

“It may be a fair generalization to assert that the top levels of most “normal” bull markets are characterized by a tendency to equate stock risks with bond risks.”

“Rates of return on stocks are a function of three things: beginning dividend yields, growth of earnings, and changes in valuation.”

“It has been well and correctly remarked that the only things that go up in credit crisis and financial panic are correlations and volatility.”

“It becomes more and more evident that stock prices are not alone determined by high or low credit, earnings or carloadings. There is another mighty factor which cannot be charted along with the various business indices. It is how high or how low are the hearts of men and women during the given period.”

“If you think Treasuries have no risk and high yield bonds have risk, the yield spread is there to compensate for the bearing of that incremental risk. The question is whether it is adequate.”

“In point of fact, all sorts of considerations enter into the market valuation which are in no way relevant to the prospective yield.”

“For us the principal test is creditworthiness, don’t buy common stocks of companies that need continuous access to capital markets.”

“While we can learn from the long run about how bonds and stocks respond to changing environments and to each other, the long run can tell us perilously little about what kinds of environments lie ahead.”

“I always look for red flags. My major red flag all the time is when long governments yield 600 basis points over the yield on the S&P 500. At that point, stocks have always been overpriced.”

“People worry about the riskiness of stocks, but bonds can be just as risky.”

“Long-term bonds can be almost as volatile as stocks. They have their own corrections.”

“Credit is the most important part of the economy.”

“A cheap stock can stay cheap forever, but if you own a bankrupt bond, the process of emerging from bankruptcy and distributing new securities offers a practical catalyst to realize the value.”

“My approach to bonds is pretty much like my approach to stocks. If I can’t understand something, I tend to forget it.”