The mystery of the bond market

I have never understood the bond market. Never.

I know what bonds are, and I understand how their yield works. I just don't understand the market. I never understood why when stocks go up, bonds go down, and vice-versa (although that piece of conventional wisdom seems to have gone the way of the dodo bird, so maybe it's not true anymore?) I can't tell they're going up or down just by looking at the numbers, so I have to trust what I read and hear. A hard thing to do for a control freak (but not hard enough to actually sit down and figure it out).

Now, I'm no dummy. As I believe I've mentioned before, my investment portfolio was doing quite well before this meltdown, and it's continued to do okay. But 95% of it is in equities, 'cos I don't understand bonds and I refused to buy GICs (although they're starting to look better). I sort of understand coupons -- I've bought a few in my time -- but not bonds themselves. So I shy away from them.

I have a small amount of Canadian government bond funds. I bought them because it's the "right thing to do." Everyone tells me I should have more, but I don't really get it. I'm doing just as well off my dividends. so I should buy more because? Ah, yes, capital preservation. Slow, small growth, but your capital is safe.

Today, Derek DeCloet in the Globe & Mail warned of an impending bond bubble. Huh? How can you create a bubble out of government bonds? Maybe US bonds are a bit riskier since the US Gov't now owes gazillions, but is he saying that the US may go bankrupt? And what about Canadian bonds? We're in pretty good shape (although you'd never know reading the news these days.)

Help me someone! Explain to me like I'm a 5-year old. I was thinking of buying more bonds every year as I get closer to 60 to preserve my capital, but now, I'm not so sure.

Isn't a well-diversified equity portfolio enough?