Why in the world would you own bonds? • Hacker News Board

Re: Why in the world would you own bonds?

#31

Post by ac29 » Wed, Mar 17, 2021, 4:08 AM UTC

nlh wrote: post #24

One 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…

The book he has coming out this year The Changing World Order: Why Nations Succeed and Fail certainly seems to touch on some similar themes from the brief description I found online.

Re: Why in the world would you own bonds?

#32

Post by gonzo41 » Wed, Mar 17, 2021, 4:09 AM UTC

nlh wrote: post #24

One 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…

Which is no different from people buying bitcoin and talking about it here :D

Re: Why in the world would you own bonds?

#33

Post by mdorazio » Wed, Mar 17, 2021, 4:10 AM UTC

every wrote: post #11

Trying to speculate on the commercial bond market is exceedingly difficult and risky. Even the experts often take a beating. But using certain sectors of the bond market as a savings and retirement mechanism can be quite effective. Consider US tax-free municipal bonds (munies). They are safe, with defaults at a miniscule percentage of corporate bonds. And many are backed with third party insurance against defaults. T…

Keep in mind there's a hidden gotcha with bond funds like vwalx in that the price of bonds changes over time roughly correlated with expected inflation. If you've been paying attention to vwalx and other bonds over the last month, you'll have seen the price go down significantly as treasury yields have gone up. So there's a risk that while your %yield on invested capital remains the same, the value of your invested capital itself can still drop since you don't own the bonds themselves and aren't holding them to maturity.

Re: Why in the world would you own bonds?

#34

Post by DennisP » Wed, Mar 17, 2021, 4:11 AM UTC

nlh wrote: post #24

One 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…

He doesn't recommend particular companies. Are you suggesting that Ray Dalio thinks he's so powerful that he can make Asian equities in general do better, just because he says he likes them?

Re: Why in the world would you own bonds?

#35

Post by tlbsofware » Wed, Mar 17, 2021, 4:11 AM UTC

Benjamin Graham and Warren Buffett would disagree, they don’t exactly recommend buying and holding bonds until maturity but instead to buy bonds on the market, when the bond yield is say at 6% any bond with a coupon value less than that will be worth less than its face value, when those rates drop the bond will be worth more than its face value, if you buy bonds when interest rates are high and then sell them when they are low you can make a very sizable chunk off of them that is greater than the coupon value

Re: Why in the world would you own bonds?

#36

Post by riffraff » Wed, Mar 17, 2021, 4:11 AM UTC

dannyw wrote: post #12

adeelk93 wrote: post #10

“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.

but the amount of US bonds debt is $20 trillion, no?

There seem to be way more bonds around than what the fed owns.

Re: Why in the world would you own bonds?

#37

Post by 01100011 » Wed, Mar 17, 2021, 4:14 AM UTC

mc10 wrote: post #30

ISL wrote: post #19

Earlier quoted context omitted.

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.

True but losing 5% on a bond investment might be better than losing 10% in a savings account or 50% in the market. You have to think about your timelines and risk tolerance.

Re: Why in the world would you own bonds?

#38

Post by ZephyrBlu » Wed, Mar 17, 2021, 4:14 AM UTC

DennisP wrote: post #34

nlh wrote: post #24

One 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…

He doesn't recommend particular companies. Are you suggesting that Ray Dalio thinks he's so powerful that he can make Asian equities in general do better, just because he says he likes them?

"I like the stock"

Re: Why in the world would you own bonds?

#39

Post by vermilingua » Wed, Mar 17, 2021, 4:16 AM UTC

nlh wrote: post #24

One 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…

Sure, but if he didn’t actually believe what he’s saying, why stake the money on it? Your argument seems like a tautology.

Re: Why in the world would you own bonds?

#40

Post by ZephyrBlu » Wed, Mar 17, 2021, 4:17 AM UTC

adeelk93 wrote: post #22

dannyw wrote: post #12

Earlier quoted context omitted.

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.

I believe that every dollar the Fed has "printed" went into bonds because that is how the US financial system works.

The government gets money from the Fed by selling them bonds in exchange for cash.