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

Re: Why in the world would you own bonds?

#231

Post by runako » Wed, Mar 17, 2021, 1:21 PM 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.)

This analysis appears to have been done while only looking at prices. Since a very material portion of equity returns over time comes from dividends, if you don't count reinvested dividends over such a long period you are going to end up dramatically undercounting equity returns.

TL;DR; gold didn't beat the S&P 500 over the past 15 years.

Re: Why in the world would you own bonds?

#232

Post by WJW » Wed, Mar 17, 2021, 1:21 PM UTC

cosmodisk wrote: post #206

fakedang wrote: post #93

Earlier quoted context omitted.

> Recently this was Jamie Dimon lambasting Bitcoin all the while a cryptocurrency trading desk was being set up at Chase. But Jamie Dimon also has a reputation of not being the smartest bulb in the block, and also being overly cautious so.... I think the GP statement is more correct though. A lot of fund managers love to gloat about their positions rather than talk the inverse.

You don't become a CEO of a large bank by being the smartest,this title usually belongs to the ones a few steps below.

Perhaps a few quants in the bank have higher IQ, but you don't make it to CEO of a large bank by being stupid. A carefully cultivated image of being "not the smartest bulb" can be a powerful advantage. Making dumb mistakes when it doesn't matter can make people underestimate you at more crucial moments.

Re: Why in the world would you own bonds?

#233

Post by eru » Wed, Mar 17, 2021, 1:21 PM UTC

anm89 wrote: post #69

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…

I mean sort of. Just staying as long bonds and bills as possible has barely lost for a quarter in the last half century. As the article mentions that paradigm is probably over.

Real yields are negative now and have been negative before.

Re: Why in the world would you own bonds?

#234

Post by chii » Wed, Mar 17, 2021, 1:22 PM UTC

Bancakes wrote: post #164

neilwilson wrote: post #119

The reason you own bonds - particularly government bonds - is because they are better than the alternative. At the point somebody is bidding in a primary government bond auction, they are either a pension fund with a bank deposit, and/or the bank backing that deposit with central bank reserves. Even with all the investment options available, somebody always has to end up in that position in aggregate. Asset prices ri…

Owning gov't bonds also boosts your ego. "The US owes me money, and they better pay up when I say, or else..."

or else what? You gonna point your gun at them to pay up? They got a bigger gun than you, and almost every other entity in the world.

Re: Why in the world would you own bonds?

#235

Post by eru » Wed, Mar 17, 2021, 1:22 PM 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…

> Globally, no one that matters wants it to fail, therefore it won't.

Currencies have failed before from eg incompetence, without anyone bearing the ill will.

(For what it's worth, I essentially agree with your conclusion. But I think this is not a good argument.)

Re: Why in the world would you own bonds?

#236

Post by bradleyjg » Wed, Mar 17, 2021, 1:23 PM 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…

> But using certain sectors of the bond market as a savings and retirement mechanism can be quite effective.

> returns are multiples of US Treasuries, CDs, money markets

Multiples of tiny numbers are still tiny. What role should a muni bond yielding 2% and maturing in twenty five years play in my retirement portfolio? That might not even beat inflation.

Re: Why in the world would you own bonds?

#237

Post by eru » Wed, Mar 17, 2021, 1:24 PM UTC

TheAdamAndChe wrote: post #201

koonsolo wrote: post #181

Earlier quoted context omitted.

Globally, no one wants a pandemic, therefore...

Globally, no one wants a housing price collapse and global recession, therefore...

Actually, the general public kept demanding a housing price collapse around 2008. It's rather tragic.

See https://www.goodreads.com/book/show/43062766-shut-out for more detail than you ever wanted to know, or check out the author's blog at https://www.idiosyncraticwhisk.com/

Re: Why in the world would you own bonds?

#238

Post by eru » Wed, Mar 17, 2021, 1:25 PM UTC

psychiatrist24 wrote: post #191

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.

> Unfortunately, those short periods of time are enough to bankrupt people.

Maybe. But that just means that being a bull is tricky business, too. It doesn't mean that being a bear is good business.

Re: Why in the world would you own bonds?

#239

Post by jgalt212 » Wed, Mar 17, 2021, 1:27 PM 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…

> Recently this was Jamie Dimon lambasting Bitcoin all the while a cryptocurrency trading desk was being set up at Chase.

JPM Chase has 250K employees. Do you think Jamie was made aware every time the markets division took a hard look at crypto?

Re: Why in the world would you own bonds?

#240

Post by api » Wed, Mar 17, 2021, 1:27 PM UTC

eru wrote: post #237

TheAdamAndChe wrote: post #201

Earlier quoted context omitted.

Globally, no one wants a housing price collapse and global recession, therefore...

Actually, the general public kept demanding a housing price collapse around 2008. It's rather tragic. See https://www.goodreads.com/book/show/43062766-shut-out for more detail than you ever wanted to know, or check out the author's blog at https://www.idiosyncraticwhisk.com/

Housing prices that are too high are terrible too. They effectively lock people out of homeownership on reasonable terms.

I would prefer reasonable home prices, which means neither collapse nor bubble mania.