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

Re: Why in the world would you own bonds?

#191

Post by psychiatrist24 » Wed, Mar 17, 2021, 9:37 AM UTC

ping_pong wrote: post #122

People like Ray Dalio keep saying this, and scores of others have been talking about how fiat currency will fail, but it won't. Globally, no one that matters wants it to fail, therefore it won't. People like Paul Tudor Jones have been saying that the USD will fail for decades and people should buy gold. Even Peter Schiff has been talking about gold and hyperinflation since before the Great Recssion. All the bears hav…

"All the bears have been completely wrong, except for short periods of time."

Unfortunately, those short periods of time are enough to bankrupt people. I don't think anybody is claiming fiat currencies will go away forever.

Re: Why in the world would you own bonds?

#192

Post by beforeolives » Wed, Mar 17, 2021, 9:48 AM UTC

JohnJamesRambo wrote: post #168

rawtxapp wrote: post #49

Earlier quoted context omitted.

This was the part that caught my attention as well, it would be super interesting to see it play in real-time. For one, how would they even put capital movements controls on crypto? For example, I just have to remember my 12 word seed and I can hop on a plane to another country and my crypto comes with me. The other part is, wouldn't those capital controls be the last nail in the coffin of "we lost complete control o…

The minute they try to impose those controls on crypto is the ultimate Streisand Effect moment that will confirm to everyone that they definitely need this asset. I suspect this is why they have avoided it so far.

> The minute they try to impose those controls on crypto is the ultimate Streisand Effect moment that will confirm to everyone that they definitely need this asset.

I'm not convinced. Your scenario relies on people having some deep conviction about the value and usefulness of cryptocurrencies. I think that this is true only for a very small vocal minority of users/buyers. Most people just want to make easy money with it - that's why I think heavy regulation/bans will simply crash the prices instead of leading to a Streisand effect.

Re: Why in the world would you own bonds?

#193

Post by vermilingua » Wed, Mar 17, 2021, 9:50 AM UTC

SuchAnonMuchWow wrote: post #180

vermilingua wrote: post #54

Earlier quoted context omitted.

Sure, but I’ve no idea how that would apply to this strategy, there are no prescribed purchases, and what could they possibly go short on if nobody buys bonds, the government? Then they’d have bigger problems.

You can do the opposite of pump and dump: there is an investment you want to buy, talk it down, buy it low.

That would be much more fitting, but does that apply to bonds? My understanding was that the whole point of bonds is that they're more or less immune to market forces, and run on their own schedule?

Re: Why in the world would you own bonds?

#194

Post by teraku » Wed, Mar 17, 2021, 9:52 AM UTC

runeks wrote: post #161

ping_pong wrote: post #122

People like Ray Dalio keep saying this, and scores of others have been talking about how fiat currency will fail, but it won't. Globally, no one that matters wants it to fail, therefore it won't. People like Paul Tudor Jones have been saying that the USD will fail for decades and people should buy gold. Even Peter Schiff has been talking about gold and hyperinflation since before the Great Recssion. All the bears hav…

> Globally, no one that matters wants it to fail, therefore it won't. I’ve seen this argument before, and can’t help to think how naive it sounds. Can you name one other case where the fact that we don’t want something to fail results in it being unable to fail? Actions have consequences. No matter how much we don’t want a particular set of consequences to occur, they will if we perform the wrong actions.

It might make it sound like they are an inactive bunch. But they take action precisely because they don't want it to fail.

Re: Why in the world would you own bonds?

#195

Post by mrep » Wed, Mar 17, 2021, 10:29 AM UTC

JumpCrisscross wrote: post #80

vecinu wrote: post #20

The 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…

> Who truly believes this is a likely scenario? The United States is the only major power with a strong ideological belief in unrestricted capital flows. The EU and China have both implemented capital controls in the modern era, sometimes repeatedly. (U.K. currently stands out, too.) All it takes is a populist “the rich are fleeing with their capital” trope to take hold on the far left and/or the right, and the centr…

> The United States is the only major power with a strong ideological belief in unrestricted capital flows.

Doesn't seem that way for citizens considering we still have to pay US taxes when living abroad (there are some tax agreements but still), have to pay an exit tax if we want to renounce our citizenship, and the US requires foreign banks to report US citizens assets to the US government.

Re: Why in the world would you own bonds?

#196

Post by fsagx » Wed, Mar 17, 2021, 10:49 AM UTC

anm89 wrote: post #66

DennisP wrote: post #34

Earlier quoted context omitted.

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?

A small Ray Dalio Flaps his wings in Connecticut and an Asian Small Cap beats its revenue forecast. edit: For the record, i wrote this because it was fun. I'm not endorsing that this is the case.

I like it. But maybe try it as haiku:

small Ray Dalio

flaps his wings in the U. S.

asian small caps soar

Re: Why in the world would you own bonds?

#197

Post by throw0101a » Wed, Mar 17, 2021, 10:56 AM UTC

Ben Carlson gives a few reasons:

> * Bonds hedge stock market volatility.

> * Bonds can be used to rebalance.

> * Bonds can be used for spending purposes.

> * Bonds protect against deflation.

> * There are other options but not many.

* https://awealthofcommonsense.com/2020/08/why-would-anyone-ow...

Re: Why in the world would you own bonds?

#198

Post by throw0101a » Wed, Mar 17, 2021, 11:09 AM UTC

nostromo wrote: post #148

ping_pong wrote: post #122

People like Ray Dalio keep saying this, and scores of others have been talking about how fiat currency will fail, but it won't. Globally, no one that matters wants it to fail, therefore it won't. People like Paul Tudor Jones have been saying that the USD will fail for decades and people should buy gold. Even Peter Schiff has been talking about gold and hyperinflation since before the Great Recssion. All the bears hav…

Gold has performed almost as well as the S&P 500 has over the past 15 years or so. Or even outperformed it depending on your starting date. This is amazing given that it’s literally just an inert metal vs the 500 biggest American Corporations. (Comparing GLD vs SPY starting around 2005.)

And in six of those years (2013-2019) it was absolutely flat:

* https://fred.stlouisfed.org/series/GOLDAMGBD228NLBM

If you bought gold in 2005, you would have peaked in 2011, and not recovered until mid-2020. If you have the nerve/patience to do that, you have a stronger stomach than I.

I am constantly reminded of Buffett's 2011 take:

> Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?

> Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A.

> Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices.

> A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.

* https://www.berkshirehathaway.com/letters/2011ltr.pdf

Gold has not been a very useful 'investment' over the long-term:

* https://www.pwlcapital.com/will-gold-save-the-day/

What are the expected returns of gold given that it has no earnings?

Re: Why in the world would you own bonds?

#199

Post by koheripbal » Wed, Mar 17, 2021, 11:10 AM UTC

pmastela wrote: post #64

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…

I don’t know a whole lot about professional investing, but if watching The Big Short has taught me anything it’s that the pros will say one thing publicly but do the opposite in private until it’s to their advantage to do a 180 and make their private stance actually public. Recently this was Jamie Dimon lambasting Bitcoin all the while a cryptocurrency trading desk was being set up at Chase. The following exchange fr…

Generally investors want to convince other investors of the truth (as they see it) once they've already made the bet.

The exception to that rule is if you have trouble getting OUT of an illiquid position (as in the example you quote) - then you don't want to panic other investors before you've successfully taken the other side.

Re: Why in the world would you own bonds?

#200

Post by ycombinete » Wed, Mar 17, 2021, 11:19 AM UTC

sooheon wrote: post #178

ycombinete wrote: post #29

Earlier quoted context omitted.

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.

If by total market you mean the total world market (i.e. MSCI ACWI), that's about as risk averse as you can be while still being in equities. Total US market alone is a higher risk choice: https://www.aqr.com/Insights/Perspectives/The-Long-Run-Is-Ly...

Yes I’m in VWRA, and IGLA