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Why in the world would you own bonds?

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Re: Why in the world would you own bonds?

#241

Post by eru »

roland35 wrote: post #220
nostromo wrote: post #148

Earlier quoted context omitted.

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.)

It looks like GLD has underperformed SPY overall, with a lower Sharpe ratio (risk adjusted return). Gold did have a good run between 2010-2013 though! https://www.portfoliovisualizer.com/backtest-portfolio?s=y&t...

Thanks for setting that up!

Though looking at the low correlation between gold and the rest of the market, it looks like you did make an argument there for gold as part of a diversified portfolio.

Re: Why in the world would you own bonds?

#243

Post by refurb »

jgalt212 wrote: post #239
pmastela wrote: post #64

Earlier quoted context omitted.

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?

Not only that, there is a difference between thinking crypto is a fad and creating a trading desk to profit off that fad.

Re: Why in the world would you own bonds?

#244

Post by every »

bradleyjg wrote: post #236
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.

Probably none. That's why my link is to a high yield municipal bond fund with low fees. I roll over my monthly distributions and buy more shares. I've never sold or traded a single share. I took Warren Buffett's advice to heart:

"Wall Street makes its money on activity. You make your money on inactivity."

Re: Why in the world would you own bonds?

#245

Post by refurb »

IgorPartola wrote: post #225
eru wrote: post #219

Earlier quoted context omitted.

What's a ladder attack?

Not an expert at all but the way WSB explains it, it’s where hedge funds trade GME back and forth between each other, gradually lowering the price with each trade. It’s a coordinated effort toy manipulate the market and is illegal. According to WSB the SEC either doesn’t care or fines hedge funds so little for stuff like this that it’s worth it to them to do it anyways (as well as selling naked short and under report…

How do they sell a public stock back and forth between each other? How could one fund put shares up at a given price (especially one below the current bid price) and ensure their partner fund is matched as the buyer?

Wouldn’t a market maker need to collude as well?

Not saying it’s not true, I genuinely curious as to the mechanics.

Re: Why in the world would you own bonds?

#246

Post by ben509 »

chii wrote: post #234
Bancakes wrote: post #164

Earlier quoted context omitted.

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.

Or else you and other bondholders take away their credit card.

Re: Why in the world would you own bonds?

#247

Post by refurb »

emodendroket wrote: post #210
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…

Far fewer people than imagined even flee to different states within the US because of higher taxes. The notion that everyone's going to go live in the Caribbean and eschew their social lives and their kids' fancy schools seems unlikely. Consider: https://www.bloomberg.com/news/articles/2021-03-10/wall-stre...

Big difference between a lower tax rate and having access to your money blocked.

Re: Why in the world would you own bonds?

#248

Post by chii »

missedthecue wrote: post #211
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…

Bitcoin is only useful if you can turn it into fiat relatively easily. Government can very easily control almost all of those channels.

in the world where you have heavy capital control, enough to warrant using crypto to escape, the fiat will be worthless to you (hence the capital control!), and thus, others will be willing to accept your crypto instead of fiat!

Re: Why in the world would you own bonds?

#249

Post by spiralx »

obviouslynotme wrote: post #81
atombender wrote: post #68

Earlier quoted context omitted.

But the Fed pays earnings back to the Treasury. And while the Fed is independent, it's certainly deeply intertwined with the US government. The Fed holding US government debt seems intuitively counterproductive to me.

They don't pay all earnings to the USG, only everything above a certain threshold IIRC. It's only counterproductive if you think like a normal person instead of a central bank. Their mission is to keep the dollar stable. They are doing that by keeping the USG stable. All the central banks are acting in concert right now to save the global financial system. My guess is that we are being slowly transitioned to removing…

The US has been trying to reduce the usage of the USD as a reserve currency (it's the largest such currency but not the only one - EUR, GBP and JPY are also used) due to it not having any real benefit to the US while exposing its economy to the effects of financial crises around the world, which tend to lead to countries purchasing dollars and driving the price up which makes imports more expensive.

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Ben Bernanke (ex-FED Chairman) - The dollar’s international role: An “exorbitant privilege”?

https://www.brookings.edu/blog/ben-bernanke/2016/01/07/the-d...

> A great deal of U.S. currency is held abroad, which amounts to an interest-free loan to the United States. However, the interest savings are probably on the order of $20 billion a year, a small fraction of a percent of U.S. GDP, and that “seigniorage,” as it is called, would probably still exist even if the dollar lost ground to other currencies...

> The safe haven aspect of the dollar is actually a negative for U.S. firms, since it implies that they become less competitive (the dollar is stronger) at precisely the times that global economic conditions are most difficult.

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The ‘reserve currency’ myth: The US dollar’s current and future role in the world economy

https://www.ussc.edu.au/analysis/the-reserve-currency-myth-t...

> This safe-haven bid for US dollar assets means that the US dollar often behaves in ways that seem counter-intuitive relative to US economic fundamentals. As Figure 2 shows, the US dollar appreciates in response to economic policy uncertainty. A 1 per cent increase in the Global Economic Policy Uncertainty Index raises the real value of the US dollar by 0.2 per cent, controlling for relative interest rate, inflation and economic growth differentials with the rest of the world.

> The appreciation exacerbates trade tensions between the United States and the rest of the world by weighing on US export competitiveness, setting in train a protectionist spiral.

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The IMF already has a global reserve asset called the Special Drawing Rights:

https://www.imf.org/en/About/Factsheets/Sheets/2016/08/01/14...

Re: Why in the world would you own bonds?

#250

Post by eru »

throw0101a wrote: post #198
nostromo wrote: post #148

Earlier quoted context omitted.

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…

Of course, farmland might get confiscated from you. Or you might have to pay taxes on it, etc.

A small amount of gold might get lost or stolen and it's usually more annoying to sell than stocks. But otherwise, you can just keep it in a sock under your pillow and be reasonably sure it's still there in a few decades.

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