Yield Curves Invert in U.S., U.K • Hacker News Board

Re: Yield Curves Invert in U.S., U.K

#21

Post by rolltiide » Wed, Aug 14, 2019, 1:43 PM UTC

whateveryou381 wrote: post #13

torstenvl wrote: post #5

Time to get more conservative with your investments. Just moved my retirement accounts from 100% in a 2050 lifecycle fund to 75% in a 2030 lifecycle fund and 25% in just government bonds. Not all investment vehicles have a "lifecycle" fund but its intent is to be appropriately conservative for a target date. As the date grows closer, the fund gets more conservative in order to lessen the risk of sudden swings right b…

Why does low or negative yield bonds mean that you are going to be ok with govt bonds? This is exactly the problem, where bonds are no longer providing interest payments. I agree that being more conservative is probably necessary, however I think other than specific investments and... burying your cash might be the "conservative" options. Bonds were those, and no longer are now.

The bond interest payments are separate from the value of the bond. Which you can sell back at a greater premium and faster than even worrying about maturity.

This is the greatest bull market in bonds of all time and they are starting to behave like cheap deep in-the-money options contracts, which decline slightly in value over time due to theta (time value). Options are fun.

Re: Yield Curves Invert in U.S., U.K

#22

Post by synaesthesisx » Wed, Aug 14, 2019, 1:43 PM UTC

Market conditions have changed to the point where the yield curve is likely irrelevant, and markets will continue to moon indefinitely.

Re: Yield Curves Invert in U.S., U.K

#23

Post by wil421 » Wed, Aug 14, 2019, 1:44 PM UTC

jermaustin1 wrote: post #12

torstenvl wrote: post #5

Time to get more conservative with your investments. Just moved my retirement accounts from 100% in a 2050 lifecycle fund to 75% in a 2030 lifecycle fund and 25% in just government bonds. Not all investment vehicles have a "lifecycle" fund but its intent is to be appropriately conservative for a target date. As the date grows closer, the fund gets more conservative in order to lessen the risk of sudden swings right b…

I'm 40% in cash, 50% in S&P and 10% in small-cap. The last few months, all of my contributions have been going into cash, so that when the fall happens, I can hopefully scoop up a deal.

Let’s talk in 10 years and see if your cash will beat my S&P allocation.

Re: Yield Curves Invert in U.S., U.K

#24

Post by steveeq1 » Wed, Aug 14, 2019, 1:48 PM UTC

synaesthesisx wrote: post #22

Market conditions have changed to the point where the yield curve is likely irrelevant, and markets will continue to moon indefinitely.

So we'll never have another recession? That's silly. All markets crash.

Re: Yield Curves Invert in U.S., U.K

#25

Post by Retric » Wed, Aug 14, 2019, 1:49 PM UTC

wil421 wrote: post #23

jermaustin1 wrote: post #12

Earlier quoted context omitted.

I'm 40% in cash, 50% in S&P and 10% in small-cap. The last few months, all of my contributions have been going into cash, so that when the fall happens, I can hopefully scoop up a deal.

Let’s talk in 10 years and see if your cash will beat my S&P allocation.

It’s about diversification and timing the market not simply holding cash for 10 years. I also just sold some stock, but I am still 75% in stocks.

Re: Yield Curves Invert in U.S., U.K

#26

Post by nabdab » Wed, Aug 14, 2019, 1:53 PM UTC

learc83 wrote: post #14

It's a self fulfilling prophesy to an extent because all it takes to cause a recession is to convince everyone there's a recession.

It takes more than that. Recessions are not just the second order effect of people being financially causious.

Re: Yield Curves Invert in U.S., U.K

#27

Post by aalleavitch » Wed, Aug 14, 2019, 1:54 PM UTC

You’re not going to get a return on investment if none of your consumers have enough money to buy anything. A negative return is the market itself telling you that you need to give them money for purchases to even happen.

Re: Yield Curves Invert in U.S., U.K

#28

Post by dboreham » Wed, Aug 14, 2019, 1:55 PM UTC

Retric wrote: post #25

wil421 wrote: post #23

Earlier quoted context omitted.

Let’s talk in 10 years and see if your cash will beat my S&P allocation.

It’s about diversification and timing the market not simply holding cash for 10 years. I also just sold some stock, but I am still 75% in stocks.

"and timing the market"

Hmm. Isn't that known to be impossible?

Re: Yield Curves Invert in U.S., U.K

#29

Post by pmart123 » Wed, Aug 14, 2019, 1:56 PM UTC

rolltiide wrote: post #21

whateveryou381 wrote: post #13

Earlier quoted context omitted.

Why does low or negative yield bonds mean that you are going to be ok with govt bonds? This is exactly the problem, where bonds are no longer providing interest payments. I agree that being more conservative is probably necessary, however I think other than specific investments and... burying your cash might be the "conservative" options. Bonds were those, and no longer are now.

The bond interest payments are separate from the value of the bond. Which you can sell back at a greater premium and faster than even worrying about maturity. This is the greatest bull market in bonds of all time and they are starting to behave like cheap deep in-the-money options contracts, which decline slightly in value over time due to theta (time value). Options are fun.

I’m not sure how I get your logic? I do think the US bond yields have a large discrepancy versus other developed market yields, but convexity greater increases as yields fall towards zero. So how is that behavior similar to a deep ITM option?

Re: Yield Curves Invert in U.S., U.K

#30

Post by rrss » Wed, Aug 14, 2019, 1:57 PM UTC

nabdab wrote: post #26

learc83 wrote: post #14

It's a self fulfilling prophesy to an extent because all it takes to cause a recession is to convince everyone there's a recession.

It takes more than that. Recessions are not just the second order effect of people being financially causious.

What more does it take?