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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?

#481

Post by ivanche »

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.

True. But in a period 1969-1989 it had a return of, IIRC, 5700%.

Re: Why in the world would you own bonds?

#482

Post by nostrademons »

omegaworks wrote: post #466
nostrademons wrote: post #462

Earlier quoted context omitted.

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 transpo…

We didn't have an abrupt, acute disruption in the money supply, though - at least not a negative one. The quantity of money available went up by 40% in March 2020, and velocity went down correspondingly. We had an abrupt, acute disruption in the labor supply: people were unable to work. We also had large disruptions in trade and in demand.

This is not 2009, when there were plenty of people available to work, there was plenty of consumer demand, but there was no money to pay them because the banks gambled it all away. The primary feature of the COVID recession was a massive supply shock and demand shift. We had potatoes piling up not because there were too many potatoes, but because there were no truck drivers and warehouse workers needed to move them from farm to table. We also had record hunger and record food assistance during that time period.

Re: Why in the world would you own bonds?

#483

Post by valuearb »

fakedang wrote: post #480
valuearb wrote: post #423

Earlier quoted context omitted.

I’m not sure what you mean, his bank was the strongest and most highly capitalized during 2008. He famously had to be brow beaten into accepting federal bailout money. And brilliant doesn’t mean perfect. he’s had his share of mistakes, but his business record is one of the best.

a.) Jamie Dimon had nothing to do with JPMorgan's strong financial position in 2008. He just lucked into the fact that JPM was not exposed to MBSs as heavily as the others. JPM did get exposed mightily in the flash crash of 2012 though, and that was under his watch. 2.) Where do you get this info that he was "brow-beaten" into accepting Fed money? Many of the banks, including others such as Wells Fargo and Boa didn't…

1) Jamie Dimon had been COO for four years, and CEO for over two years, if he wasn’t responsible for the banks capital position, who was?

2) if JP Morgan Chase wasn’t as exposed to the MBS meltdown as other banks, how is that not to his credit?

3) The $6B in trading losses in 2012 didn’t stop JPMorgan from posting a record profit of $21B for the year.

Anyone looks bad if you attribute all their accomplishments to luck but doggedly hold them responsible for every mistake.

I did confuse Dimon with Kovacevich, but Jamie also didn’t need the TARP funding.

In the end a 12%+ annualized return and total return 50% higher than the S&P500 over 15 years is nothing to sneeze at.

Re: Why in the world would you own bonds?

#484

Post by loco5niner »

glenmorangie_14 wrote: post #431
SamuelAdams wrote: post #414

Earlier quoted context omitted.

Exactly. Look at the stock market from 1970 to today. 2001 and 2008 are a blip on the radar. What this is missing is the amount of time investors are investing in. Day traders don’t care about tomorrow, they care about the difference between 9 am and 4 pm. Options traders might care about the next few weeks. If you are investing for 20+ years in a retirement account, you don’t care about the bubble. It will self corr…

The SP500 was around $950 in Sept of 1997. It was also around $950 in July of 2009. I would say the stock market went no where for 20 years. I don't think it is fair to call 2001 and 2008 "blips". Their combined effect was we lost 20 years worth of potential growth.

It certainly didn't go nowhere. Obviously, if someone bought and sold their entire portfolio on those (VERY cherry-picked - just look at the graph, lol) days, they would have made 0 dollars.

But look on either side of that blip and there is plenty of profit.

Re: Why in the world would you own bonds?

#485

Post by loco5niner »

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."

According to Investopedia: "A perfect example of dollar cost averaging is its use in 401(k) plans...an employee can select a pre-determined amount of their salary..."

Re: Why in the world would you own bonds?

#486

Post by imtringued »

DennisP wrote: post #34
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…

He doesn't recommend particular companies. Are you suggesting that Ray Dalio thinks he's so powerful that he can make Asian equities in general do better, just because he says he likes them?

He scares readers of the potential for a rug pull of bonds and then tells readers to pull the rug. He might not be powerful but he clearly is trying to create a self fulfilling prophecy.

Re: Why in the world would you own bonds?

#487

Post by ric2b »

eru wrote: post #252
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…

> Bank deposits also suffer from the risk that the bank will fail. Alas, thanks to widespread government deposit insurance, that's not really much of a risk.

Pretty sure that's only for individuals.

Re: Why in the world would you own bonds?

#488

Post by ping_pong »

runeks wrote: post #161
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…

> 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.

Naive? People on the opposite side of the argument have been wrong consistently for decades. The last time they were right was the Great Depression, almost 100 years ago. I think policy makers like the Federal Reserve have learned a lot since then.

Re: Why in the world would you own bonds?

#489

Post by imtringued »

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…

My prediction is that thanks to the stimulus checks the USA will start growing much faster and leave the EU in the dust. Meanwhile the Euro zone is unable to engage even in the tiniest bit of fiscal stimulus.

Re: Why in the world would you own bonds?

#490

Post by imtringued »

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…

House construction is such a lucrative industry in the US, too bad they banned it. Imagine banning farms that produce more than a set amount of wheat or corn per acre. Absolutely ridiculous.
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