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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?

#381

Post by chenster »

encoderer wrote: post #356
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…

You were like 25 during the dotcom crash and 35 during the housing crash. It’s possible these events were timed in a way that inflicted maximum psychological damage for you. I know at 25 I had just started my first “good” job and my first child was born at 35. Quite possibly you’re being too pessimistic.

I almost thought I heard myself talking

Re: Why in the world would you own bonds?

#382

Post by dakna »

TuringNYC wrote: post #294
floor2 wrote: post #285

Earlier quoted context omitted.

It's great that you recognize professional investing isn't something you know a lot about. It's a bit concerning that people believe a hollywood movie has taught them how the industry works. Keep in mind how hollywood portrays "hackers" or "scientists" or "Russians" or whatever group is an outsider or opposition to the protagonist and realize they're doing the same to finance.

While clearly not all of Hollywood portrays the industry accurately, from my perspective the movie was incredibly reflective of the players in the space, and the dynamics. I worked in the mortgage/CDO/CDS industry for 10yrs during that period (2005-2015). If anything, the movie was too positive. There aren't as many players like Steve Carell's character who are worried about the world, they are usually worried about…

I recommend 3 movies to every family member willing to deal with financial topics as a form of edutainment. The Big Short and Margin Call are two of them.

The 3rd one is 99 Homes. The key line is: "Don't get emotional about real estate." What is sold as a place for family memories for some, is just another asset class for others.

Re: Why in the world would you own bonds?

#383

Post by partiallypro »

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 still live in a generation where people think "real estate only goes up." I have so many people bragging about how they've nearly doubled the equity in their home around here in Nashville. 2007 didn't change anything, it was just a blip. People are still flipping houses and leveraging their existing homes to buy new ones. In the long run though, the saying hasn't really been proven false, asset prices tend to always increase.

Re: Why in the world would you own bonds?

#384

Post by zby »

Gustomaximus wrote: post #228
neilwilson wrote: post #124

Earlier quoted context omitted.

"Non rhetorical question: are there any scenarios where the US defaults on their debts?" No. Since it is just a bond swap. To anybody not in the US (like me), the US dollar is just a 0% permanent bearer bond. When a bond matures it is swapped for central bank reserves (floating debt). When one is sold it is swapped back (fixed rate term debt). The monetary system is reflexive. No financial institution is going to hol…

"Non rhetorical question: are there any scenarios where the US defaults on their debts?" 1) Technically they have defaulted in '79, though it was more of a delay. 2) See how divided politics has become. What happens if the US hits the debt ceiling and the other party decide enough is enough and wont approve appropriate borrowing capacity and all budget. Given divisive politics of recent does this seem that far fetche…

Well in the cases of number 3, 5, 6 and 7 in these cases the Feds will just print the money - technically it is just a flip in their computer system and also in practice the difference is not that big - it changes a fixed term debt to a on-demand debt. The only thing stopping it can be a political will - but I think the stigma of not paying debts is higher than the stigma of inflation - so most probably it will be done every time.

Re: Why in the world would you own bonds?

#385

Post by partiallypro »

bluetwo wrote: post #358
fumar wrote: post #336

Earlier quoted context omitted.

You are saying the market will go south when 401Ks as a trend stop?

Since the beginning of 401ks, the yearly amount being locked away exceeded the amount being cashed out. Thanks to baby boomers retiring, a couple of years ago that reversed, and will stay reversed for the rest of our lives. The first condition creates a natural headwind to increase stock values. The current condition will reverse that.

But generational wealth is increasing, as boomers die their kids get the money...which they then reinvest. The money doesn't just disappear.

Re: Why in the world would you own bonds?

#386

Post by fullshark »

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…

When the crash comes though what do you want to own? Other than real estate and equities I can't think of anything else.

Re: Why in the world would you own bonds?

#387

Post by wavefunction »

partiallypro wrote: post #383
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 still live in a generation where people think "real estate only goes up." I have so many people bragging about how they've nearly doubled the equity in their home around here in Nashville. 2007 didn't change anything, it was just a blip. People are still flipping houses and leveraging their existing homes to buy new ones. In the long run though, the saying hasn't really been proven false, asset prices tend to alwa…

In a world where WeWork can be valued at 47B USD by professional capitalists, there's something to be said for acknowledging that the stock market and stock valuations can be untethered to reality. I think the sentiment you mentioned is a combination of that and a bit of a humorous/nihilistic attitude towards the same.

Re: Why in the world would you own bonds?

#388

Post by tim333 »

DebtDeflation wrote: post #330
reader_mode wrote: post #313

Earlier quoted context omitted.

Crash or inflation ?

Not mutually exclusive. Inflation could tick up to 5-6% per annum, forcing the Fed to get back to positive real rates, and in the process bring about an economic crash. I actually think that's the most likely sequence of events.

A bond price crash and inflation are almost the same thing as in inflation would lead to higher bond yields and hence lower prices for a given yield.

Whether that would crash stocks or the economy is more questionable. Probably stocks.

Re: Why in the world would you own bonds?

#389

Post by DennisP »

ericd wrote: post #89
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…

It happened during the Great Depression (the outlawing of private gold ownership). I wouldn’t say it’s that unlikely if things get rough.

Yes but it happened then because the dollar was backed by gold, and the Fed needed more gold to back the new dollars they wanted to make, to bail out the economy. Now they can print as many dollars as they like.

https://en.wikipedia.org/wiki/Executive_Order_6102

Re: Why in the world would you own bonds?

#390

Post by fakedang »

valuearb wrote: post #366
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.

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.

I'm not pointing to his commentary on Bitcoin or whatever. I was just stating a fact, that Dimon isn't considered brilliant by any Mark by industry insiders in finance, just lucky during 08. He has been wrong on a lot of things, even though I actually agree with his crypto thesis.
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