Your Bond Portfolio Is Being Eaten Alive and the Suits Are Just Now Noticing

I watched a financial advisor on cable television last week explain bonds to a retired schoolteacher like she was a golden retriever being handed a sandwich, and I thought: this woman has no idea she is holding a bag that somebody else already emptied. US investors are finally reckoning with what inflation does to fixed-income investments, and the reckoning is ugly in the way only quiet, slow-moving destruction can be ugly — not a car crash but a house rotting from the inside while the real estate agent keeps refreshing the listing price. Bonds were supposed to be the safe part of your portfolio, the adult in the room, the thing you bought when you got scared of stocks. That story served Wall Street beautifully for forty years of declining interest rates. Now inflation has rewritten the terms of that arrangement without sending anyone a notice, and the people getting hurt are not the portfolio managers in Connecticut with their thirteen-digit assets under management — they are the 62-year-old warehouse supervisor in Akron who moved heavy into bonds because his brother-in-law told him it was the conservative move. The money did not disappear. It migrated upward, the way it always does, into the hands of institutions that could reposition faster than any ordinary human being checking their 401k balance during a lunch break. Somebody profited from the repricing. Somebody always does. The yield looked decent right up until the moment it