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Why in the world would you own bonds?

bridgewater.com

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Re: Why in the world would you own bonds?

#141

Post by 314 »

nostrademons wrote: post #138
AYBABTME wrote: post #125

Earlier quoted context omitted.

While interesting, I have a feeling that your prediction may be subject to recency and availability bias. If I picture myself looking from within the US, your scenario sure resonates. But looking from outside, I'm not convinced it does. From the other side of the planet, it looks like the US is having a moment but the other governments aren't sitting idle and letting entropy increase. I'm also not sure that 50 years…

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.

Re: Why in the world would you own bonds?

#142

Post by ericd »

nostrademons wrote: post #135
ericd wrote: post #128

Earlier quoted context omitted.

I’m curious, since you seem to have thought a lot about this - any suggestions for defensible locations with plenty of natural resources? I’m guessing suburbia generally doesn’t meet that definition.

When I looked into it the top locations were in the Pacific Northwest (extending down to the Lost Coast in California) or Northern New England. Ample rainfall, surrounded by mountains, lots of timber, sea routes to reestablish trade or for fishing, and potentially farmable. Some runners-up included the Bay Area & Coastal California (easily defensible & fertile, but has overpopulation, water issues and limited timber)…

Thanks for the comprehensive reply! I hope you’re wrong, but I can’t say that I haven’t considered a lot of the same things, and I had similar thoughts about PNW and New England being relatively good options. Hard to really look at this kind of scenario and come to any conclusions with enough confidence to act on them, though - so many unknowns and fundamentally different rules.

Re: Why in the world would you own bonds?

#143

Post by teraku »

I read it and I feel like the author does not understand how government debt works. And this makes them not understand bonds as well.

But to answer the original question, disregarding any logic of how state debt or bonds work, why would you own bonds? Two possible answers:

1) Because they serve as a deflation hedge. This is interesting for people with lots of money who need some more security 2) Because it is guaranteed money (at least bonds for countries like US, UK, JPN, DE).

Re: Why in the world would you own bonds?

#144

Post by jamesgreenleaf »

teraku wrote: post #143

I read it and I feel like the author does not understand how government debt works. And this makes them not understand bonds as well. But to answer the original question, disregarding any logic of how state debt or bonds work, why would you own bonds? Two possible answers: 1) Because they serve as a deflation hedge. This is interesting for people with lots of money who need some more security 2) Because it is guarant…

I would bet with certainty that Ray Dalio understands how government debt works.

Re: Why in the world would you own bonds?

#145

Post by vagrantJin »

neighbour wrote: post #53
xkjkls wrote: post #43

Earlier quoted context omitted.

> One thing I've learned about professional investors is that no matter what, at the end of the day they're talking their book. That doesn't make them wrong. It's basically just a tautology. If you believe X is a great investment, and you aren't investing in it , that would be a far stranger situation.

Basically what Taleb describes as Skin in the Game: >"Don’t Tell Me What You Think, Tell Me What You Have In Your Portfolio"

Then again, Taleb has little to no respect for most professional investors.

Re: Why in the world would you own bonds?

#146

Post by dejj »

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…

TIL the word “avuncular”. It’s perfectly cromulent.

Re: Why in the world would you own bonds?

#147

Post by nostrademons »

ZephyrBlu wrote: post #137
nostrademons wrote: post #126

Earlier quoted context omitted.

That's not how the U.S. financial system works. The government doesn't "get money from the Fed" - it gets money from the Treasury, which either collects it from taxes or issues government debt to raise funds. The Fed participates in open market operations, and one of the markets they participate in is the Treasury bond auction. But they participate in others as well: notably, they've recently been major participants…

Thank for you explaining it better. > When they participate, they effectively inject cash into the system, since the amount they can pay is unlimited and subject only to their mandate to get full employment and limited inflation In the case where they buy Treasury bonds, the government itself gets money that they can use as they see fit (I.e. stimulus checks), right? Whereas in this case they just "inject cash into t…

But if the Fed hadn't bought the Treasury bonds, some other investor would've, just at a worse price. That's the thing about markets: participants are fungible, as is the money itself.

There's a big difference in dynamics between one firm giving money to another in a non-competitive situation (say, a union bargaining with a monopsony corporation) vs. a market of buyers trading with a market of sellers (say, the commodity or stock markets). You get efficient price discovery in the latter situation, you don't in the former. And the concern up-thread about the sheer scale of Fed purchases is that when the Fed becomes the only market participant, it starts to look an awful lot like the former situation, and market mechanisms break down.

Re: Why in the world would you own bonds?

#148

Post by nostromo »

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…

Gold has performed almost as well as the S&P 500 has over the past 15 years or so. Or even outperformed it depending on your starting date.

This is amazing given that it’s literally just an inert metal vs the 500 biggest American Corporations.

(Comparing GLD vs SPY starting around 2005.)

Re: Why in the world would you own bonds?

#149

Post by tarsinge »

javierluraschi wrote: post #98
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…

I don't think they need to go as far as prohibit crypto, all they have to do is increase taxes for crypto since we already have to pay taxes on capital gains for crypto. If this tax rate increases, people will be less likely to use crypto.

Isn’t that what Diallo is saying?

Re: Why in the world would you own bonds?

#150

Post by [deleted] »

teraku wrote: post #143

I read it and I feel like the author does not understand how government debt works. And this makes them not understand bonds as well. But to answer the original question, disregarding any logic of how state debt or bonds work, why would you own bonds? Two possible answers: 1) Because they serve as a deflation hedge. This is interesting for people with lots of money who need some more security 2) Because it is guarant…

[deleted]
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