With stocks, all good investment stories begin in October. Bonds are no different. In October 1981, the federal government of the United States of America auctioned off thirty-year treasury bonds at a rate of 14.8%, the highest in its recorded history. At the time, the United States was steeped in annual inflation of 10.5%.
For those who anticipated the rise of a Paul Volcker figure, or at least had the sense that interest rates were more likely to decline over the coming decades than rise, and chose to purchase U.S. government debt, the results were some of the most impressive on a risk-adjusted basis.
If you invested $10,000 in U.S. Treasuries in October 1981, your family would have received payments of $740 every six months for thirty years and then received your initial $10,000 back as well.
This isn’t just an abstract thought experiment. In October 1981, the United States … Read the rest of this article!