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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?

#461

Post by jplr8922 »

TuringNYC wrote: post #312
jplr8922 wrote: post #299

The more Dalio gets public, the more I'm doubting his game. His book ''principles'' is interesting, however with time its starting to look like an elaborate marketing plan. I have no doubt that he his serious about his principles and business culture, but there are second order effects to make everyting public. In the case of his firm culture (which claims to be an idea meritocracy), it will attract certain kind of p…

I see it as him trying to leave a positive legacy. He realizes he's done fantastically as an investor, is aging, and wants to leave a non-financial legacy to the world.

hmm you are right :

https://www.linkedin.com/pulse/your-life-journey-exercise-ra...

Re: Why in the world would you own bonds?

#462

Post by nostrademons »

omegaworks wrote: post #459
nostrademons wrote: post #446

Earlier quoted context omitted.

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 no…

You can "demand" it all you want. If supply doesn't meet that demand, you get inflation.

Ultimately living conditions are set by real goods & services, not by the amount of money flowing into a sector. If more money flows in and the supply of real goods remains fixed, it just makes everything cost more. I'd agree that most military spending is a waste of money - why does an F-22 cost $334M? But directing that spending into housing, education, and health care without addressing the supply bottlenecks in those industries will just make housing, health care, and college cost more. We should be building more housing (and particularly, streamlining zoning/permitting requirements so that more developers can enter the market), breaking up big health insurers so that there's more competition in the market and you don't need to put up with Anthem's bullshit, and developing lower-cost alternatives to a 4-year college degree.

On a societal level "more money" is never the answer - "more goods and services" is. You fix shortages by fixing shortages, not by letting everybody pay more for the same musical chairs.

Re: Why in the world would you own bonds?

#463

Post by Klwohu »

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…

That's some neat blablabla but his argument is mathematical while yours is purely emotional.

Re: Why in the world would you own bonds?

#464

Post by bradleyjg »

tomatocracy wrote: post #449
bradleyjg wrote: post #269

Earlier quoted context omitted.

If you look at the price (not total return) history of your selected fund it has significant growth, about 20%, over the last ten years. Bond prices increase when the risk free rate (i.e. treasuries) decreases. Over the last forty years treasury rates have been more or less steadily decreasing. The ten year treasury was paying over 15% in 1981 and now it’s paying a little over 1.5%. What this means is that bond inves…

"Juiced returns" is a consequence of some investment strategies, but not all. For example, if you aimed to hold a constant-maturity bond portfolio then that involves a degree of enforced trading - you need to sell shorter maturities and buy longer ones as time passes so that you don't end up with a year less maturity for each year the passes (or worse if defaults or other events lead to early calls or early payments…

I’d guess that holding bonds until maturity in the form of a bond ladder was more common from 1980-2000, but since then bond funds have become more common.

Re: Why in the world would you own bonds?

#465

Post by DennisP »

zamfi wrote: post #435
DennisP wrote: post #266

Earlier quoted context omitted.

That makes sense, but when I took the real estate appraiser courses a couple decades ago, none of it was about market expectations. It was entirely about recent sale prices of comparable properties. Maybe experienced appraisers do more than that, but my state at least doesn't expect them to.

Could also be that appraisers are being conservative (their "customers" are the banks, after all, not the buyers) in their estimates and haven't caught up with the higher bidding? But isn't "recent sale prices of comparable properties" about market expectations though? Like isn't the implication of an appraisal that if you were forced to sell the house you could get the appraised amount for it?

You're right, and in a bull market it's inherently conservative since you're looking at past prices. What I mean is, if houses are selling more than appraisal it's mainly because prices are up compared to recent sales, not because appraisers are accounting for any particular view about how that will play out over the next few years.

It was surprisingly subjective though. It wasn't like you were feeding lots of data into big statistical models. You'd only pick the few closest comp houses that sold recently. They'd still have different features, so you'd try to figure out the value of the features by comparing the comp houses. It was a simple mechanical procedure but you could work it out different ways and get different numbers. Our instructor admitted there was a lot of opportunity to make it come out however you wanted, and even said that experienced appraisers did so consciously.

So I wouldn't be surprised if an appraiser who thought the market was in for decline actually did write lower appraisals, though they'd justify it entirely by recent comps.

Re: Why in the world would you own bonds?

#466

Post by omegaworks »

nostrademons wrote: post #462
omegaworks wrote: post #459

Earlier quoted context omitted.

>"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 no…

You can "demand" it all you want. If supply doesn't meet that demand, you get inflation. Ultimately living conditions are set by real goods & services, not by the amount of money flowing into a sector. If more money flows in and the supply of real goods remains fixed, it just makes everything cost more. I'd agree that most military spending is a waste of money - why does an F-22 cost $334M? But directing that spendin…

It is the answer when the shortage is an abrupt, acute disruption in the money supply. A massive number of people were made unemployed by the pandemic. We had lines at food pantries stretching miles long.

If you recall, at the beginning of the pandemic we we had farms ploughing under crops for lack of demand. Potatoes stacking up to high heavens, farmers offering them free to anyone who'd arrive with a bag to transport them.

The author actually mentions the traditional knobs of monetary policy don't impact the distribution of money at the bottom of the economy where it is needed. That's why the direct stimulus and now family UBI is so different, and should be looked at as imperfect but necessary for addressing the need at hand.

Re: Why in the world would you own bonds?

#467

Post by infinite8s »

ROARosen wrote: post #116
jonmc12 wrote: post #77

Earlier quoted context omitted.

https://finbox.com/ideas/ray-dalio

Big fund holdings (without knowing their full strategy) are insightful, but only in the sense that you can see how many big funds are holding a particular stock. Looking just at holdings of any one fund can be pointless since you never know how these holding are part of some bigger strategy especially when you don't know what other derivatives they're holding like options / futures and other non publicly traded produ…

Also shorts aren't required to be published in SEC disclosure forms, so for a market neutral long-short fund you're only seeing half the picture.

Re: Why in the world would you own bonds?

#468

Post by 0xffff2 »

kmeisthax wrote: post #413
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…

Real estate is a bit different because the government actively restricts the supply of developable land and legally-buildable housing units on that land. The crash will come once average suburbanites stop protesting everything denser than a half-acre single-family home and city councils realize that mixed-zoning is far more sustainable.

>The crash will come once average suburbanites stop protesting everything denser than a half-acre single-family home and city councils realize that mixed-zoning is far more sustainable.

So conversely, the crash will never come as long as average suburbanites continue to protest everything denser than a half-acre single-family home? Because I wouldn't bet on human nature changing any time soon.

Re: Why in the world would you own bonds?

#469

Post by throw0101a »

analyte123 wrote: post #278
throw0101a wrote: post #262

Earlier quoted context omitted.

> Of course, farmland might get confiscated from you. In what area of the world do you live in that these scenarios are actually keeping you up at night?

See this massive list of countries where this has occurred: https://en.m.wikipedia.org/wiki/Land_reforms_by_country This is not even to mention the prospect of “constructive” land reform, e.g. squeezing landowners (or certain disfavored types of landowners) with policy and then increasing property or income taxes to the point where they have no choice but to sell at a loss.

That doesn't answer my question:

> In what area of the world do you live in that these scenarios are actually keeping you up at night?

Canada is on that list. I live in Canada. This is not something anyone I know is losing sleep over.

They may be buying gold for other reasons, but it is not for the possibility of losing their land.

This HN thread is about Ray Dalio and bonds, and the sub-thread is about the S&P 500 versus gold returns, and gold returns in general. Bringing in farmland is quite the curve ball.

Re: Why in the world would you own bonds?

#470

Post by toomuchtodo »

pc86 wrote: post #314
TuringNYC wrote: post #294

Earlier quoted context omitted.

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…

> Another very accurate movie: "Margin Call" Jeremy Irons is fantastic in this film. The entire board room scene is amazing.

For those who haven't seen this masterpiece.

https://www.youtube.com/watch?v=Hhy7JUinlu0

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