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Fixed-income investors worldwide face bleak future: Warren Buffett

Hemani Sheth Mumbai | Updated on February 28, 2021

Warren Buffett. File photo   -  REUTERS

In his annual letter to Berkshire Hathaway’s investors, Warren Buffet said that fixed-income investors worldwide face a “bleak future”.

“Bonds are not the place to be these days,” Buffett wrote in his letter.

He further wrote about how the income recently available from a 10-year United States (US) Treasury bond had fallen 94 per cent from the 15.8 per cent yield available in September 1981. The yield was 0.93 per cent at yearend in 2020.

“In certain large and important countries, such as Germany and Japan, investors earn a negative return on trillions of dollars of sovereign debt. Fixed-income investors worldwide – whether pension funds, insurance companies or retirees – face a bleak future,” he wrote.

“Some insurers, as well as other bond investors, may try to juice the pathetic returns now available by shifting their purchases to obligations backed by shaky borrowers. Risky loans, however, are not the answer to inadequate interest rates. Three decades ago, the once-mighty savings and loan industry destroyed itself, partly by ignoring that maxim,” he added.

Buffett, in his annual letter, steered clear of politics and rarely mentioned the Covid-19 pandemic. The business mogul in his letter further assured investors that his successors and he will ensure that investors are rewarded with the “passage of time” and “inner calm.”

“Productive assets such as farms, real estate and, yes, business ownership produce wealth – lots of it. Most owners of such properties will be rewarded. All that’s required is the passage of time, an inner calm, ample diversification and a minimization of transactions and fees. Still, investors must never forget that their expenses are Wall Street’s income,” he wrote.

Published on February 28, 2021

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