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

Re: Why in the world would you own bonds?

#451

Post by Supermancho » Wed, Mar 17, 2021, 6:02 PM UTC

IgorPartola wrote: post #298

altcognito wrote: post #265

Earlier quoted context omitted.

WSB is an "extreme" example. I think it happens ALL the time in very common places (including HN). Some types of market manipulation are truly a bad thing. I'm sure someone engaging in some of the more egregious cases could rationalize their behavior as "it's just guerilla marketing, everybody does that". That's not wholly wrong -- the intent is really more important than the action in these cases. Were people buying…

From what I can tell, currently WSB is riding the bubble. Or rather their thesis is that a short squeeze will happen. In some conversations they try to justify that the company will actually turn itself around using the capital raised from selling the new generation of consoles, but quickly the conversation turns to the prospect of the squeeze. In other words, most people who are buying GME from WSB advice aren't the…

When you know CompanyA fires a bunch of people, the price goes up because of the perception that the company will have more capital to leverage. Knowing that an event has happened or expect the consequence of an event (CompanyA gets sued for patent violation) to have an effect on the company, changes the stock price through participation. GME is an interesting case where the event is perceived to be a complex situation with an outcome that is believed to be good for participants, increasing participation and driving the price up. I don't see how it's special, other than someone with a lot of money made a plan that motivated participants to believe in that plan, then play against it.

Re: Why in the world would you own bonds?

#452

Post by mikestew » Wed, Mar 17, 2021, 6:02 PM UTC

shanusmagnus wrote: post #339

jdhzzz wrote: post #333

Earlier quoted context omitted.

That's why one keeps 10 years of cash (or equivalent) as a cache to weather those downturns. I'd recommend 6 years, but something that you could draw from while markets recover. It seems as if the cadence of market downturns and recoveries is increasing. It's not a binary choice.

I would love to know who really keeps 10 years of expenses in cash on-hand. I bet you could write the list of non-billionaires on a napkin.

You could likely write the list, billionaire or not, on a Post-It(tm). I mean maybe billionaires keep 10 years of billionaire lifestyle in cold hard, but that would seem to be a poor use of such a huge chunk of cash.

Re: Why in the world would you own bonds?

#453

Post by stevievee » Wed, Mar 17, 2021, 6:03 PM UTC

nostrademons wrote: post #440

stevievee wrote: post #270

Earlier quoted context omitted.

The ideas and narratives put forth by Bridgewater/Dalio over the past 1-3 years are permeating markets and shaping investor sentiment more than you think. Both retail and institutional.

This could also be because he's right , and as more information comes out, the rest of the market is coming around to his line of thinking. I made a number of bets on the tech industry early on in my career (2005-08): that the Web and Javascript would become increasingly more important, that Python would be a major language both for web development and for scientific computing, that Google and other new tech companie…

The definition of "right" within market dynamics isn't simple - prices will increase with the increased flow of capital regardless of whether the underlying ideas are sound. Changing the opinions of money managers can change the flow of capital. Just saying it is possible.

Your anecdote isn't equivalent here. You weren't broadcasting your idea to millions of people managing billions of dollars. If you did have that kind of power, it could have helped javascript/python/Google/startups get adopted faster.

Re: Why in the world would you own bonds?

#454

Post by tomatocracy » Wed, Mar 17, 2021, 6:04 PM UTC

dharma1 wrote: post #132

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…

I think pension funds are the bag holders here. They require 6% yield or so to function, and real yields are still negative or near zero. Yet their investment mandates often dictate they need to have bonds or a mix of equities and bonds.

Life insurers are the other big "forced" buyers of long bonds. Regulation tends to be stricter on them in terms of requiring a certain portfolio vs pension funds too.

Re: Why in the world would you own bonds?

#455

Post by emodendroket » Wed, Mar 17, 2021, 6:05 PM UTC

nostrademons wrote: post #427

emodendroket wrote: post #409

Earlier quoted context omitted.

And in this collapse scenario the cities -- incidentally where a lot of wealth and power tend to be concentrated -- simply consent to starve to death? Or are you defending against them too?

The cities are absolutely going to invade the surrounding countryside. Mobs and gangs of hungry people banding together to take what they can from weaker neighbors has been a feature of nearly every instance of state failure. As a city-dweller, your strategy for surviving this is to join one. As a wealthy suburb dweller, you better hope you have a private security advantage where you can kill the whole mob before it…

I'm not sure that the life of a subsistence farmer is necessarily one of privilege, especially if we're imagining there's no gas and presumably the recurrent drought issues in MA aren't getting better. Seems like you might be better off getting in the pod.

Re: Why in the world would you own bonds?

#456

Post by [deleted] » Wed, Mar 17, 2021, 6:08 PM UTC

tylerhou wrote: post #335

IgorPartola wrote: post #225

Earlier quoted context omitted.

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…

I’m 90% sure that this is just something WSB made up and isn’t actually evidence of manipulation. Seeing as you can look at the order books for almost all exchange traded stocks and see similar trading patterns. (Unless you believe that all stocks are being manipulated, which is a stretch.)

[deleted]

Re: Why in the world would you own bonds?

#457

Post by emodendroket » Wed, Mar 17, 2021, 6:11 PM UTC

thebean11 wrote: post #290

missedthecue wrote: post #211

Earlier quoted context omitted.

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

Presumably you'd be going into a country that is not attempting to control those channels though

So, assuming the USG is serious about this, you're probably looking at China, Iran, Russia, Venezuela, or North Korea. Color me skeptical that the captains of industry are headed there.

Re: Why in the world would you own bonds?

#458

Post by cosmodisk » Wed, Mar 17, 2021, 6:22 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.

I didn't mean the CEOs of large financial institutions are stupid( at least not most of them). To get to such positions by only being smart is never enough: there's a plethora of skills and personal traits that play their part.

Re: Why in the world would you own bonds?

#459

Post by omegaworks » Wed, Mar 17, 2021, 6:31 PM UTC

nostrademons wrote: post #446

meowfly wrote: post #406

Earlier quoted context omitted.

I mean it isn't that people actually think "stocks only go up", it's that the donor class own stocks and that then means political landscape is designed to always bail them out. I'm closer to your age and experienced those recessions but my take away isn't that stocks go down, it's that the government will pull every tool it has to keep the wealthy wealthy.

This. I don't doubt that there's going to be a crisis and a reckoning, but I changed my mind in 2020 on what that crisis will look like. The Fed & government's actions (both during the pandemic and, in retrospect, in 2018) show that they're not going to let a financial crisis happen . Instead, we're going to get a currency crisis, since whenever asset values go down the Fed prints to restore them. The fact that a cur…

>"living wage" is the bar now

Heaven forbid we demand an economic system built upon the notion that everyone who works should have the ability to live a decent life with secure food and housing.

It's telling that many see spending and regulating toward this goal as "printing money" unscrupulously, yet when similar orders of magnitude spends are casually allocated toward the Department of Defense on an annual basis not a word is uttered about their utility.

Re: Why in the world would you own bonds?

#460

Post by wcoenen » Wed, Mar 17, 2021, 6:35 PM UTC

shostack wrote: post #130

ac29 wrote: post #31

Earlier quoted context omitted.

The book he has coming out this year The Changing World Order: Why Nations Succeed and Fail certainly seems to touch on some similar themes from the brief description I found online.

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.

> I wonder if he thinks the days of the dollar's reserve currency status are numbered.

That's what he's been saying in his book "The Changing World Order". I believe it's not finished yet, but the chapters are published on his LinkedIn newsletter one by one: https://www.linkedin.com/newsletters/principled-perspectives...