Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Why in the world would you own bonds?

bridgewater.com

Post reply on HN
Print view View original

361–370 of 532 posts

Re: Why in the world would you own bonds?

#361

Post by [deleted] »

cainxinth wrote: post #301
DebtDeflation wrote: post #276

We seem to have an entire generation of people who think "stonks can only go up". Similar views were expressed about houses/real estate in 2007. At 47, I'm probably substantially older than the average HN poster, but having lived through the 2001 dotcom implosion and the 2008 financial crisis has given me some perspective. I'm getting some really bad vibes about the sustainability of the the economy and asset markets…

> We seem to have an entire generation of people who think "stonks can only go up" I'm not denying the existence of bubbles, busts, and crashes, but historically and on average, the stock market does only go up. This market is overvalued and will likely correct, but that doesn't mean it won't continue to rise on the aggregate.

[deleted]

Re: Why in the world would you own bonds?

#362

Post by wait_a_minute »

tchvil wrote: post #352
cainxinth wrote: post #301

Earlier quoted context omitted.

> We seem to have an entire generation of people who think "stonks can only go up" I'm not denying the existence of bubbles, busts, and crashes, but historically and on average, the stock market does only go up. This market is overvalued and will likely correct, but that doesn't mean it won't continue to rise on the aggregate.

Say you confidently bought the roaring Eurostox 600 in March 2000. You saw it coming back to its value in July 2007. Then reach 1% gain in March 2015. And a 7% gain in Feb 2020. Buying S&P, or the Apple, Amazon and Tesla ones is another story. Looking at the average can be misleading.

This is why I dollar cost average. Timing purchases is impossible for me since I’m not a finance genius, so I just buy stock each time I get paid.

Re: Why in the world would you own bonds?

#363

Post by betterunix2 »

eru wrote: post #226
shostack wrote: post #130

Earlier quoted context omitted.

Yes, it seems he's betting against the Western financial growth and stability. I wonder if he thinks the days of the dollar's reserve currency status are numbered.

Huh, why? If the US economy is going to do well, bond yields will be going up. That means a bond short position will pay off. Being short on bonds is basically financially almost exactly the same thing as borrowing money. (The US treasury is 'short' on T-bills. They have to essentially 'buy them back' when they become due.)

It is not that simple. Right now interest rates are extremely low, so what you said is likely to be the case. On the other hand, as the economy improves credit risk will decline, and lower credit risk can drive bond yields lower (this is exactly what happens in the high yield market), which is more or less what happened for three decades beginning in the 1980s.

Re: Why in the world would you own bonds?

#364

Post by playingchanges »

DebtDeflation wrote: post #276

We seem to have an entire generation of people who think "stonks can only go up". Similar views were expressed about houses/real estate in 2007. At 47, I'm probably substantially older than the average HN poster, but having lived through the 2001 dotcom implosion and the 2008 financial crisis has given me some perspective. I'm getting some really bad vibes about the sustainability of the the economy and asset markets…

Replace ‘stocks only go up’ with ‘fiat only goes down’.

Re: Why in the world would you own bonds?

#365

Post by jeffreyrogers »

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…

That's not what he's saying.

He's saying this:

1. Bond prices are inversely related to interest rates. Interest rates have been declining for 50 years. They are now near 0. They probably can't go much lower, so they can really only go up.

2. If they go up, bond prices go down.

3. Institutional asset managers with obligations (e.g. pensions, budgets) already cannot meet their obligations with the yield from bonds and the bonds are unlikely to appreciate in value.

4. Therefore, it makes no sense for institutional asset managers to be invested in bonds because thta will pretty much guarantee that they will be unable to meet their obligations.

Re: Why in the world would you own bonds?

#366

Post by valuearb »

fakedang wrote: post #93
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. 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.

Jamie Dimon has a reputation for brilliance. His Bitcoin comments were spot on, people criticizing them don’t understand the regulations banks live under.

BTC may be great, but it has no intrinsic value and trading it is pure speculation. That’s not appropriate use of bank capital. It’s probably not an appropriate use of most peoples capital.

Re: Why in the world would you own bonds?

#367

Post by elefanten »

Arrath wrote: post #360
GenerocUsername wrote: post #346

Earlier quoted context omitted.

Probably has more to do with the fact that society on the whole tends to build more than it destroys. More value is created over time than lost.

More _economic_ value, sure. But at what cost to the environment, biodiversity, our dwindling resources, societal health, our psyches? When does this become unsustainable?

It's not even close to being unsustainable now and it may ultimately remain sustainable for timescales that are difficult for us to relate to.

Re: Why in the world would you own bonds?

#368

Post by smeyer »

dmurray wrote: post #202
csomar wrote: post #185

Earlier quoted context omitted.

> Recently this was Jamie Dimon lambasting Bitcoin all the while a cryptocurrency trading desk was being set up at Chase. Did he change his position, though. Having a negative opinion of something is one thing; and profiting from selling shovels for the gold rush is another thing. The trading desk is not a long position.

In the case of bitcoin, it probably is. Legitimising bitcoin as an investment for institutionals pushes the price higher, and also increases trading volumes and thereby trading profits. In contrast with stocks, where a sell off generally brings volatility and good news to trading desks.

Just because adds some legitimacy and pushes bitcoin prices higher doesn't have to mean that JPM (let alone Dimon himself) has a long position nor a longterm positive belief in bitcoin. Maybe they do! But maybe they just want to make some money selling shovels.

Re: Why in the world would you own bonds?

#369

Post by 35fbe7d3d5b9 »

teraku wrote: post #194
runeks wrote: post #161

Earlier quoted context omitted.

> 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.

Precisely. And it's important to forget those actions aren't just about interest rates and issuing currency.

The US dollar will continue to be supreme so long as the United States controls the US Agency for International Development, the Office of Foreign Asset Control, and the US Marine Corps.

Re: Why in the world would you own bonds?

#370

Post by elefanten »

BitwiseFool wrote: post #306
cainxinth wrote: post #301

Earlier quoted context omitted.

> We seem to have an entire generation of people who think "stonks can only go up" I'm not denying the existence of bubbles, busts, and crashes, but historically and on average, the stock market does only go up. This market is overvalued and will likely correct, but that doesn't mean it won't continue to rise on the aggregate.

Markets do seem to only go up, but the stocks on the market today are very different from 10, 20, 30+ years ago. I know that poorly performing stocks are eventually removed from indices and exchanges and they are replaced with new ones. Is it the case the market always going up in the long run is actually due to survivorship bias?

That's not survivorship bias, it's just churn. And, broadly speaking, growth -- there are more companies operating now than there were in 1950.
Post reply on HN