As a former deep value analyst who studied legendary investor Warren Buffett (including traveling to Omaha for the annual shareholder meetings, a.k.a., “Woodstock for capitalists”), I always enjoy the Berkshire Hathaway annual shareholder letter. This year marks Buffett’s 50th letter, making the reading all the more special.
There’s always something investors can learn from Buffett’s writings, but I approach the letters from a different angle. The keen insights Buffett shares when describing how he runs Berkshire Hathaway can be applied to any business … and any family wealth.
In our February 23rd post on the future prospects for bond investors, we stated that:
- We don’t expect a bloodbath for bond returns going forward, but…
- We believe the risk of rising interest rates is unappreciated today
- Should interest rates begin a long-term upward trend, bond returns could be 50% lower than the 8.7% experienced since 1981
- If rates rise more quickly, bond returns could be in the low single digits, even negative
In this post, we add a couple of data points to support those ideas. The first piece of evidence illustrates the complacency among bond investors that is concerning to us. The graphic below quantified the sentiment among bond investors. It’s an index comprising of a handful of surveys among retail and institutional investors alike.