Why in the world would you own bonds? • Hacker News Board

Re: Why in the world would you own bonds?

#51

Post by drfuchs » Wed, Mar 17, 2021, 4:27 AM UTC

vermilingua wrote: post #39

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…

Sure, but if he didn’t actually believe what he’s saying, why stake the money on it? Your argument seems like a tautology.

That’s what a “Pump and Dump” is: buy bad investment, talk it up, sell to bigger fools. (Not that this is what’s going on here; think GameStop perhaps.)

Re: Why in the world would you own bonds?

#52

Post by dmoy » Wed, Mar 17, 2021, 4:28 AM UTC

paxys wrote: post #18

TedDoesntTalk wrote: post #14

Earlier quoted context omitted.

> FDIC insurance maxes out at $250,000 That's PER checking account, and if they are joint checking accounts, then the max is $500,000 per account.

Slight correction – it is for all your accounts at a single institution combined.

If we're going to be pedantic, it's per institution per ownership category.

So you could have:

* individual account

* revocable trust account

* joint revocable trust account

* etc

each with a separate $250k limit at the bank (and in the case of the trusts, the limit can be $250k per beneficiary of the trust).

Re: Why in the world would you own bonds?

#53

Post by neighbour » Wed, Mar 17, 2021, 4:30 AM UTC

xkjkls wrote: post #43

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…

> 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"

Re: Why in the world would you own bonds?

#54

Post by vermilingua » Wed, Mar 17, 2021, 4:32 AM UTC

drfuchs wrote: post #51

vermilingua wrote: post #39

Earlier quoted context omitted.

Sure, but if he didn’t actually believe what he’s saying, why stake the money on it? Your argument seems like a tautology.

That’s what a “Pump and Dump” is: buy bad investment, talk it up, sell to bigger fools. (Not that this is what’s going on here; think GameStop perhaps.)

Sure, but I’ve no idea how that would apply to this strategy, there are no prescribed purchases, and what could they possibly go short on if nobody buys bonds, the government? Then they’d have bigger problems.

Re: Why in the world would you own bonds?

#55

Post by eloff » Wed, Mar 17, 2021, 4:33 AM UTC

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…

Good. Any idiot can say something online, and many do. Ray Dalio is putting his money where his mouth is, aka staking his opinion like numerai does with erasure. That makes it more credible, not less.

Unless you think he's actually trying to pump and dump the entirety of all the Asian stock markets? He doesn't have that kind of influence.

Re: Why in the world would you own bonds?

#56

Post by jljljl » Wed, Mar 17, 2021, 4:34 AM UTC

rawtxapp wrote: post #49

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…

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…

If the USG (or Europe, or China) still have a strong military, or a lot of influence over the financial sector at that point, you may have a tough time finding a bank to convert your crypto into Fiat. At that point, you’d have to find a country that accepts Bitcoin directly as a payment method or whose financial system can shrug off regulations.

That might be harder to find than you think, or might require a significant haircut on the conversion.

Re: Why in the world would you own bonds?

#57

Post by [deleted] » Wed, Mar 17, 2021, 4:36 AM UTC

eloff wrote: post #55

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…

Good. Any idiot can say something online, and many do. Ray Dalio is putting his money where his mouth is, aka staking his opinion like numerai does with erasure. That makes it more credible, not less. Unless you think he's actually trying to pump and dump the entirety of all the Asian stock markets? He doesn't have that kind of influence.

[deleted]

Re: Why in the world would you own bonds?

#58

Post by chaostheory » Wed, Mar 17, 2021, 4:42 AM UTC

Aunche wrote: post #5

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.

For context, Dalio’s current thesis is that bonds and any debt instruments are dangerous to own right now. Why? Because he thinks the dollar will collapse and lose its reserve status. Uncontrolled inflation is a big danger.

Re: Why in the world would you own bonds?

#59

Post by [deleted] » Wed, Mar 17, 2021, 4:43 AM UTC

adeelk93 wrote: post #10

“Nobody wants bonds because the yields are too low” is basically the same statement as “nobody goes to that restaurant because it’s too crowded.”

[deleted]

Re: Why in the world would you own bonds?

#60

Post by every » Wed, Mar 17, 2021, 4:43 AM UTC

dragontamer wrote: post #50

every wrote: post #11

Trying to speculate on the commercial bond market is exceedingly difficult and risky. Even the experts often take a beating. But using certain sectors of the bond market as a savings and retirement mechanism can be quite effective. Consider US tax-free municipal bonds (munies). They are safe, with defaults at a miniscule percentage of corporate bonds. And many are backed with third party insurance against defaults. T…

> Consider US tax-free municipal bonds (munies). They are safe Are they? COVID19 has destroyed the tax-budgets of many states and cities. Deficit spending / stimulus is the current plan, but how long can States keep it up? I know there's been a stimulus bill just passed. But is it enough to get state budgets back in order after a tough year?

Not certain. Many if not most munies are supported by third party insurance, such as Lloyds of London in case of default. And all are supported by the power to tax. COVID is a temporary disruption that will hopefully soon pass. We'll see...