It's possible for bond rates to go negative. Just because rates are near zero now doesn't mean there isn't room for further movement.
Just hold cash...
Why in the world would you own bonds?
21–30 of 532 posts
Re: Why in the world would you own bonds?
#22“Nobody wants bonds because the yields are too low” is basically the same statement as “nobody goes to that restaurant because it’s too crowded.”
This argument doesn't work when the Federal Reserve, an entity unconcerned about ROI, is purchasing bonds out of thin air. They now own $7 TRILLION of US govt bonds. This number was less than $100 billion before the GFC. https://www.pgpf.org/blog/2021/01/the-federal-reserve-holds-... So, yes, no investor wants bonds. Why would you buy something that's a guaranteed loss? It's increasingly just the Fed.
Great counterpoint. I knew the Fed was purchasing a lot of bonds, but I had not grasped the scale of it. I didn’t think it would be that much higher than 08.
The Brigewater article would have been a lot stronger with that $7 T figure.
Re: Why in the world would you own bonds?
#23Why in the world would you want capitalism? Bonds exist because people want to lay off risk. Its not about the yield, as much as its about the risk. Sure, you want an upside, and the yield is about the upside. But the motivation in the first place, is about the risk. "as safe as houses" turns out, not to be that safe. "as good as gold" is still pretty good, but the next unobtanium is out there. by and large, absent r…
> Why in the world would you want capitalism?
because anything less is corporate welfare. if you can’t pay your way well then...
Re: Why in the world would you own bonds?
#24One thing I've learned about professional investors is that no matter what, at the end of the day they're talking their book.
So whether you buy these arguments or not, Ray Dalio is simply promoting a position that Bridgewater no doubt has taken. So when he says:
"I believe a well-diversified portfolio of non-debt and non-dollar assets along with a short cash position is preferable to a traditional stock/bond mix that is heavily skewed to US dollars. I also believe that assets in the mature developed reserve currency countries will underperform the Asian (including Chinese) emerging countries’ markets."
It's not his avuncular advice. He has millions (billions?) of dollars committed to this bet and he wants to convince others that it's correct so it pays off.
Re: Why in the world would you own bonds?
#25Clicked the "X". Article looked a lot like the homepage. I'm not sure I can recall an EULA on an analysis article. View Source bypasses the EULA directly.
Reader mode solved it for me.
Re: Why in the world would you own bonds?
#26The conclusion kind of scares me, especially coming from Dalio. > so they could very well impose prohibitions against capital movements to other assets (e.g., gold, Bitcoin, etc.) and other locations. These tax changes could be more shocking than expected. Who truly believes this is a likely scenario? A number of folks I know are already considering fleeing the US but if this was to pass, that number would skyrocket…
Where would you go? The EU and Japan are already in a worse position than the US and if the US decides to commit to capital controls, they would probably follow. That only leaves China which already has capital controls.
Re: Why in the world would you own bonds?
#27The conclusion kind of scares me, especially coming from Dalio. > so they could very well impose prohibitions against capital movements to other assets (e.g., gold, Bitcoin, etc.) and other locations. These tax changes could be more shocking than expected. Who truly believes this is a likely scenario? A number of folks I know are already considering fleeing the US but if this was to pass, that number would skyrocket…
Where would you go? The EU and Japan are already in a worse position than the US and if the US decides to commit to capital controls, they would probably follow. That only leaves China which already has capital controls.
> That only leaves China
There are 195 different nations on earth. That leaves a lot more options than the EU, Japan, and China.
A lot of crypto-expats are going to carribean island nations.
Re: Why in the world would you own bonds?
#28One thing I've learned about professional investors is that no matter what, at the end of the day they're talking their book. So whether you buy these arguments or not, Ray Dalio is simply promoting a position that Bridgewater no doubt has taken. So when he says: "I believe a well-diversified portfolio of non-debt and non-dollar assets along with a short cash position is preferable to a traditional stock/bond mix tha…
Is that worse than recommending one course of action to retail investors while personally doing something completely different?
Re: Why in the world would you own bonds?
#29What i find particularly scary is the run on the banks scenario the author outlines. this really smashes the idea that bonds are the safe thing to get your money back. I know a lot of bonds have been selling, that's why the fed needs to buy so much every month, to make up for all that selling people are doing. Personally, i'm surprised even more people haven't been selling bonds. With the threat of inflation looming…
where do risk averse investors go these days?
On the market I'm invested in to total market index, as well as a global government bond index.
Re: Why in the world would you own bonds?
#30What i find particularly scary is the run on the banks scenario the author outlines. this really smashes the idea that bonds are the safe thing to get your money back. I know a lot of bonds have been selling, that's why the fed needs to buy so much every month, to make up for all that selling people are doing. Personally, i'm surprised even more people haven't been selling bonds. With the threat of inflation looming…
Bonds are a safe way to get your money back. It just might not buy as many cheeseburgers as you expected.
This is not a guarantee at all; if inflation is sufficiently high then you could be actively losing money holding a bond that fewer and fewer people want.