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

Re: Why in the world would you own bonds?

#391

Post by _ea1k » Wed, Mar 17, 2021, 4:13 PM UTC

buzzy_hacker wrote: post #343

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.

As a counterpoint the Nikkei has not since surpassed its peak value in 1989.

I'm curious how dividend yield and DCA factors into that, though. Would a series of investments since 1989 still have underperformed bonds?

And even if DCA weren't factored in, how would the returns compare?

Re: Why in the world would you own bonds?

#392

Post by qwerty456127 » Wed, Mar 17, 2021, 4:14 PM UTC

Perhaps people use bonds to overcome inflation without adding risk?

Re: Why in the world would you own bonds?

#393

Post by _ea1k » Wed, Mar 17, 2021, 4:15 PM UTC

sneeze-slayer wrote: post #374

wait_a_minute wrote: post #362

Earlier quoted context omitted.

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.

FYI that's just closer to periodically investing. Dollar Cost averaging is more along the lines of "I already have $100 in my account and will invest $10/month for 10 months."

Planning to DCA from future cashflows is still DCA.

Re: Why in the world would you own bonds?

#394

Post by wintermutestwin » Wed, Mar 17, 2021, 4:15 PM UTC

throwaway4good wrote: post #156

The text answers the question: The central banks are buying the bonds in a scheme that essientially boils down to print money until debt levels no longer matter. The money printing causes: - Inflation (as in rising consumer prices) - Massive swings and bubbles in the financial markets - Increasing wealth inequality This has happened until now in a global coordinated manner. This was also the policy after 2008. Howeve…

>Yes. The Chinese currency will go up compared to the dollar and the euro.

If this is true, maybe it makes more sense to invest in Chinese currency than the huge risk of investing in Chinese companies?

Re: Why in the world would you own bonds?

#395

Post by DennisP » Wed, Mar 17, 2021, 4:15 PM UTC

derivagral wrote: post #46

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…

There's (old) precedent for this in the USA[0] but it is hard to imagine for crypto. [0] https://en.wikipedia.org/wiki/Executive_Order_6102

Look at the rationale section. The Fed needed more gold so it could print more dollars. Since today's dollar isn't backed by gold or crypto, the same reasoning wouldn't apply.

In fact, if crypto were used more as money in the real economy, banning it would have the reverse effect, shrinking the amount of money in the economy.

Re: Why in the world would you own bonds?

#396

Post by partiallypro » Wed, Mar 17, 2021, 4:16 PM UTC

wavefunction wrote: post #387

partiallypro wrote: post #383

Earlier quoted context omitted.

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.

Valuations simply don't matter right now, Tesla is bigger than every car company combined and makes less than virtually all of them. I don't get it, but that's how it is. There is no end in sight, if there were a moment to burst any bubble it would have been last March...and it didn't.

Re: Why in the world would you own bonds?

#397

Post by tim333 » Wed, Mar 17, 2021, 4:17 PM UTC

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 think the causation is different - investors believe something and both invest that way themselves and preach it. It's not normally to try to juice the prices of what they own with the exception of stuff like crypto and meme stocks.

Re: Why in the world would you own bonds?

#398

Post by nostrademons » Wed, Mar 17, 2021, 4:17 PM UTC

314 wrote: post #141

nostrademons wrote: post #138

Earlier quoted context omitted.

I've been predicting something like this since about 2005, long before recent events. It just it felt like it was far off in the future, not something happening right now . The other major factor is a demographic crisis: worldwide, we have a large bulge in the number of people who are just about hitting 30 in 2020. Historically, when a lot of people reach reproductive years and there aren't the resources needed to su…

Ah, so you read what you want to hear into current events and seek confirmation bias. Your whole world-view comes off as a bit prepper / Great Replacement-crank.

It's the nature of negative black swan events that there's always a reason to believe they won't happen right up until they do. If you hold these beliefs over a long-period of time, based on long-term societal trends, "your whole world-view comes off as a bit prepper / Great Replacement-crank". If recent events bear you out, it's Availability / Recency bias. If the events actually come true, then we won't be discussing it on an Internet message board, we'll either be dead or spending our effort trying to survive, in a perverse form of Survivorship Bias.

Nevertheless, we know from history that these events do occur, and they occur much more frequently than those of us alive now believe (again a form of survivorship bias - folks that don't live in a time of peace tend not to survive). The 250-year stability of the United States - and the 75-year Pax Americana after WW2 - is a historical anomaly. The article gives a bunch of reasons why the 2020s will be different, financially, from the 1980-2020 period, and I gave a bunch of reasons why it'll be different sociopolitically. You can choose to believe them or not, but I (and Dalio) at least explained the dynamics that lead me to believe them.

Re: Why in the world would you own bonds?

#399

Post by fakedang » Wed, Mar 17, 2021, 4:20 PM UTC

WJW wrote: post #232

cosmodisk wrote: post #206

Earlier quoted context omitted.

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.

Lol, this is some nth order thought going on here. Simon's dimness isn't proofed by some bullshit crafted image but by how laggardly JPMorgan is due to Dimon's innate cautiousness. Dimon is just lucky to be head of America's largest bank at the turn of '08. Next you'll tell me IBM is a highly innovative company, I reckon.

Re: Why in the world would you own bonds?

#400

Post by toomuchtodo » Wed, Mar 17, 2021, 4:24 PM UTC

_ea1k wrote: post #391

buzzy_hacker wrote: post #343

Earlier quoted context omitted.

As a counterpoint the Nikkei has not since surpassed its peak value in 1989.

I'm curious how dividend yield and DCA factors into that, though. Would a series of investments since 1989 still have underperformed bonds? And even if DCA weren't factored in, how would the returns compare?

https://dqydj.com/nikkei-return-calculator-dividend-reinvest...