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Welcome to Long-Term Mindset, the Wednesday newsletter that helps you invest better.

Today's Issue Read Time: <2 minutes

Lesson: Why bonds rule
Timeless Content: The bond market last week -- explained.
Thread: Peter Lynch's investing process
Resource: Chris Hill's new podcast - Money Unplugged
And more!

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Friends,

When the market (and economy) crashed in 2008, it was terrible in a lot of ways. But personally, it had some benefits. At the time, I (Stoffel, here) was a young public school teacher with a secure job.

All of a sudden, everything got cheaper:

A gallon of gas fell from $4.11 to $1.60 (60% drop) from July to December.
The median nationwide price of a home fell over 15% from 2007 to 2009.

The same was true for the U.S. government.

When the stock market crashed in 2008, investors wanted the safest investments possible -- U.S. debt. When the government auctioned that debt in mid-2007, it paid 5.0% interest on 10-year treasuries. Two years later, that rate was cut in half.

But something funny is happening right now.

As the stock market has crashed and investors brace for a tariff-fueled recession, bond yields have increased. In other words, investors aren't rushing to safety like they usually do. Yields increased from 4.0% to 4.5% during last week's chaos.

(You can check this metric by simply typing "TNX" into a finance site)

Normally, this would be concerning -- but not necessarily alarming.

But the U.S. government has to refinance $9.2 trillion (yes, TRILLION) of debt payments this year. The rising yield means the government (read: tax-payers) will have to pay much more to finance this debt.

This spells bad news for everyone: the government, stock-market investors, and even the bondholders.

Does this mean we're selling all of our stocks immediately? Not at all. Holding antifragile companies with wide-moat businesses and trading at reasonable prices is still the best approach to long-term success.

But if building up a reasonable cash position to help you sleep at night -- or take advantage of better potential prices in the future -- seems appealing, there's nothing wrong with doing that.

After all, that's exactly what Warren Buffett is doing right now.

Wishing you continued investing success,

Brian Feroldi, Brian Stoffel, & Brian Withers

Long Term Mindset

One simple graphic

One piece of timeless content

Stock investors don't often pay attention to the bond market, but they should. Jamin Ball has a simple-to-understand explanation about what happened in the bond market last week. While it's a current "event," it's still a timeless lesson stock investors should understand.

One thread

Money Coach Joe

@FiSavvy

Most millionaires invest in stocks
But they don't teach you how to research companies in school
So let me break it down for you
Using the strategy of the most successful fund manager of all time:

8:10 AM • Sep 7, 2022

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Read 165 replies

Don't have a Twitter/X account? Click here to view the thread.

One resource

Chris Hill, the long-time host of the Motley Fool Money podcast, has gone out on his own with a new pod called Money Unplugged. We highly recommend it. You can check out his inaugural episode with Morgan Housel.