221–230 of 532 posts
FDIC insurance maxes out at $250,000, so it won't cover you if you're super rich or a foreign government. In that case bonds still make sense. US bonds are currently more stable and have better interest rates than any other bonds from developed countries, so people will continue buying them for the time being.
Earlier quoted context omitted.
Basically what Taleb describes as Skin in the Game: >"Don’t Tell Me What You Think, Tell Me What You Have In Your Portfolio"
Not sure I interpret it the same way. Wouldn't this advice heavily/completely discount/ignore the written words associated with the portfolio?
(I'm not sure whether I agree with the point, but I think that is the point Taleb was making.)
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.
I am invested on margin. That is for every dollar I own, my broker lends me two, so I can buy stock for three.
It's in my interest to keep interest rates low. So I want other people to invest in bonds long, rather than buy on margin (ie sort-of invest in bonds short).
Of course, my influence is so small that it doesn't really make a difference.
But I can imagine there are much smaller markets, where your voice can make a difference.
> …The economics of investing in bonds (and most financial assets) has become stupid ... Rather than get paid less than inflation why not instead buy stuff—any stuff—that will equal inflation or better? That is indeed the point of driving interest rates low or negative - to force people into economic activity. If holding a bond makes you negative money, you might as well buy something with it, which goes back into th…
Urban dwellers might be more limited but for people who have unused or underused space, this is a way to get a return on that space. Buy all you will need for the next decade of:
Salt, sugar, socks, underwear, under-shirts, vinegar, soap bars, toothbrushes, razor blades, feminine products, toilet paper, paper towels, napkins, trash bags, freezer bags, sandwich bags, foil paper, parchment paper, plastic wrap, wax paper, candles, matches, diapers, pet supplies (litter, etc.), gardening supplies, building supplies, repair supplies, medical supplies, fire wood, wood pellets, long lasting appliances and furniture, kitchenware, dinnerware, sheets and pillowcases, blankets,comforter,bedspreads, maintenance, renovations, efficiency upgrades, land, bigger house.
Some liquid soaps and chemicals have a limited shelf life of just a couple of years so it might be better to avoid unless you know the shelf life. Also be careful buying more than you need which can lead to waste. Be careful being wasteful just because you have lots of stuff at home. Buying alcohol ahead of time in bulk works if you have the discipline not to drink more. Also to get a good return you need to use the full life of your stuff before replacing from your stash, not replace early because it's right there.
There is also a macroeconomic benefit to this approach. It can get the economy out of Keynesian recessions when people save by buying.
You are however limited in total value by the free space you have.
Earlier quoted context omitted.
I’ve been watching WSB with interest for a bit. This has not been what they’ve been about until January of this year. Before it was basically a place where the one eyed were leading the blind: someone would post their research on a particular play, like buying TSLA options for a particular date at a particular price because they think the phase of the moon and the mood of the CEO will line up to give the stock price…
What's a ladder attack?
Earlier quoted context omitted.
The book he has coming out this year The Changing World Order: Why Nations Succeed and Fail certainly seems to touch on some similar themes from the brief description I found online.
Yes, it seems he's betting against the Western financial growth and stability. I wonder if he thinks the days of the dollar's reserve currency status are numbered.
If the US economy is going to do well, bond yields will be going up. That means a bond short position will pay off.
Being short on bonds is basically financially almost exactly the same thing as borrowing money.
(The US treasury is 'short' on T-bills. They have to essentially 'buy them back' when they become due.)
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…
[1] https://m.youtube.com/watch?v=PHe0bXAIuk0 [2] https://m.youtube.com/watch?v=M95m2EFb7IQ
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…
1) Technically they have defaulted in '79, though it was more of a delay.
2) See how divided politics has become. What happens if the US hits the debt ceiling and the other party decide enough is enough and wont approve appropriate borrowing capacity and all budget. Given divisive politics of recent does this seem that far fetched?
3) US debt is getting to 110% of GDP and growing fast. If this isn't controlled it will hit a point where it becomes to a point where people lose confide3nce. And sure the US govt can print money given own currency as is often touted, but currency need confidence. If people feel they are just a printing machine and decide to head for lower risk waters, they can print all they want but money will become increasingly worthless and they may beed to 'reset' which means possible default .
4) Interest rates. What if these go up? The government can influence but ultimately the market has to want to take on that risk too. If economic times get rocky its not unforeseeable the fed cant set interest rates as easily as they do today. This could flow into serious payment/cost issues on the budget.
5) Not to fear monger, but China hold a bunch of debt. What if they decide to drop a trillion onto the market while US has other crisis compounding value issues and currency runs?
6) On the flip side of foreign debt holders like china, what if some rouge president said "we are not paying you because you stole our IP" or whatever rationale. Unlikely but recent politics shows us extreme statements/positions like this can happen. Even to threaten this in an unthought statement could have serious consequence and flow-on.
7) What if we have another pandemic or natural disaster and the economy drops 30% and stays there... good luck serving the debt on a drastically shrunk economy without serious consequence.
8) What if the next generation decides they are sick of previous generations debt limiting their countries future and a movement starts 'not my debt' and some hard left/right politions take power on disgruntled citizens
Etc
And yes the US can always print money, but money can lose worth too if people dont want it because they feel too much is being printed.
And to be clear, Im not saying the US will default, but there are many reasons that could trigger it to. Personally I think short term risk (sub 20 years?) is negligible, but if they stay on the current path we either need to find MMT works (whole other discussion), or there doesn't seem to be a positive end.
Earlier quoted context omitted.
You can do the opposite of pump and dump: there is an investment you want to buy, talk it down, buy it low.
That would be much more fitting, but does that apply to bonds? My understanding was that the whole point of bonds is that they're more or less immune to market forces, and run on their own schedule?
The price of bonds with a long duration varies with the prevailing interest rate (and inflation expectations). Even if the solvency of the issuer is beyond doubt.
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…
Far fewer people than imagined even flee to different states within the US because of higher taxes. The notion that everyone's going to go live in the Caribbean and eschew their social lives and their kids' fancy schools seems unlikely. Consider: https://www.bloomberg.com/news/articles/2021-03-10/wall-stre...