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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?

#181

Post by koonsolo »

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.

Globally, no one wants a pandemic, therefore...

Re: Why in the world would you own bonds?

#183

Post by csomar »

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…

They are trying to explain it to the world, or to sub-consciously justify their position. BridgeWater has $100bn of AUM; which is not a small amount but peanuts comparing to these institutional sovereign funds. So while they can profit from the market by being smarter, they cannot move the market (neither can their readers).

Re: Why in the world would you own bonds?

#184

Post by modo_mario »

JumpCrisscross wrote: post #80
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…

> Who truly believes this is a likely scenario? The United States is the only major power with a strong ideological belief in unrestricted capital flows. The EU and China have both implemented capital controls in the modern era, sometimes repeatedly. (U.K. currently stands out, too.) All it takes is a populist “the rich are fleeing with their capital” trope to take hold on the far left and/or the right, and the centr…

> The United States is the only major power with a strong ideological belief in unrestricted capital flows.

This belief in ideological attachment to policy sounds so silly to me. It can change and it can change quite quickly in fact. It's like saying the US has a strong ideological belief in democracy that guides all it's geopolitical moves abroad.

Re: Why in the world would you own bonds?

#185

Post by csomar »

pmastela wrote: post #64
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 don’t know a whole lot about professional investing, but if watching The Big Short has taught me anything it’s that the pros will say one thing publicly but do the opposite in private until it’s to their advantage to do a 180 and make their private stance actually public. Recently this was Jamie Dimon lambasting Bitcoin all the while a cryptocurrency trading desk was being set up at Chase. The following exchange fr…

> Recently this was Jamie Dimon lambasting Bitcoin all the while a cryptocurrency trading desk was being set up at Chase.

Did he change his position, though. Having a negative opinion of something is one thing; and profiting from selling shovels for the gold rush is another thing. The trading desk is not a long position.

Re: Why in the world would you own bonds?

#186

Post by anonymoushn »

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've recently entered the space and I find that I cannot talk my book, because some trades get better when other people follow you into them and some trades get a lot worse when that happens.

Re: Why in the world would you own bonds?

#187

Post by neilwilson »

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.

They require a 6% yield to function over the long term. However you can solve that by transfer from the young - which is what we are seeing.

Hence Compulsory Pension Contributions in certain jurisdictions. Which when you follow it through is just a privatised tax where some financial middlemen get to skim off the top.

Re: Why in the world would you own bonds?

#188

Post by modo_mario »

WalterBright wrote: post #170
nostrademons wrote: post #90

Earlier quoted context omitted.

I actually believe something far scarier. I think we're going to see a worldwide disintegration of governments and then sort of a feudal anarchy - basically the Syrian Civil War, but spread across the globe. People will stop taking the government seriously and just go do what they want, with a lot of local bullies and warlords springing up to take their place. The financial picture Dalio paints is the first stage of…

> There's the climate crisis, which is the root cause of the migration crisis. The driver of that is more like unfree markets which always result in mass poverty and misery.

You might want to define unfree markets because American lives with regards to some key metrics seemed to improve more notably when it's markets were comparatively less free in the post ww2 era and china is also doing quite well and manage to get trough the 2008 financial crisis unscathed with it's application of Keynesian economics compared to US/EU.

Re: Why in the world would you own bonds?

#189

Post by zby »

neilwilson wrote: post #124
zby wrote: post #115

Some loose threads: The main difference between bonds and cash is mostly based on the fact that cash is the means of settlement. But in fact what we call cash can also have two main forms: federal reserves (debt of the feds) that can be dealt with only by banks and regular bank depositories (debt of the particular bank). And there is even a third layer of Euro Dollar which is debt of non-US banks who cannot hold fede…

"Non rhetorical question: are there any scenarios where the US defaults on their debts?" No. Since it is just a bond swap. To anybody not in the US (like me), the US dollar is just a 0% permanent bearer bond. When a bond matures it is swapped for central bank reserves (floating debt). When one is sold it is swapped back (fixed rate term debt). The monetary system is reflexive. No financial institution is going to hol…

You make it sound as if that swap was something that happens automatically - but it is not. It is something easy to do and it has been done so far consistently - but there must be circumstances where they stop doing it at least temporarily (a stalemate in the Congress or something).

Re: Why in the world would you own bonds?

#190

Post by bluecalm »

JohnJamesRambo wrote: post #168
rawtxapp wrote: post #49

Earlier quoted context omitted.

This was the part that caught my attention as well, it would be super interesting to see it play in real-time. For one, how would they even put capital movements controls on crypto? For example, I just have to remember my 12 word seed and I can hop on a plane to another country and my crypto comes with me. The other part is, wouldn't those capital controls be the last nail in the coffin of "we lost complete control o…

The minute they try to impose those controls on crypto is the ultimate Streisand Effect moment that will confirm to everyone that they definitely need this asset. I suspect this is why they have avoided it so far.

I think they avoided it because they were asleep at the wheel when it started getting traction and now limiting it would make a lot of people angry. It's a mess of epic proportions. It's probably the best strategy for regulators to wait for some major collapse (like Tether being exposed as a scam) and use that to introduce counter measures. Meanwhile the negative sum arm race continues sucking more people in.
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