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

Re: Why in the world would you own bonds?

#61

Post by obviouslynotme » Wed, Mar 17, 2021, 4:44 AM UTC

atombender wrote: post #48

dannyw wrote: post #12

Earlier quoted context omitted.

This argument doesn't work when the Federal Reserve, an entity unconcerned about ROI, is purchasing bonds out of thin air. They now own $7 TRILLION of US govt bonds. This number was less than $100 billion before the GFC. https://www.pgpf.org/blog/2021/01/the-federal-reserve-holds-... So, yes, no investor wants bonds. Why would you buy something that's a guaranteed loss? It's increasingly just the Fed.

What happens to a bond when the Fed buys treasuries? Are they "cancelled"? Or does the Fed actually hold those bonds? The latter sounds nonsensical, but I don't know enough about how the Fed works.

The Fed isn't part of the US government. They are a private bank with special powers granted by Congress. When they purchase USG bonds, they hold them and receive interest.

Re: Why in the world would you own bonds?

#62

Post by pestatije » Wed, Mar 17, 2021, 4:44 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…

Well, if they impose such restrictions (I agree that's very unlikely), how much do you think your crypto will be worth then?

Re: Why in the world would you own bonds?

#63

Post by riffraff » Wed, Mar 17, 2021, 4:47 AM UTC

ac29 wrote: post #31

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…

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.

well, the book is cited 3 times in this piece, it's almost advertisement for it :)

Re: Why in the world would you own bonds?

#64

Post by pmastela » Wed, Mar 17, 2021, 4:49 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…

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 from The Big Short stuck with me. It’s Dr. Burry’s response to Goldman Sachs when they finally returned his numerous calls:

Deeb: Dr. Burry? Burry: Yeah. Deeb: Deeb Winston, Goldman Sachs. Listen, I've been reviewing your position. I wanted to discuss your marks and make sure they're fair. Burry: Yeah, I think you mean that you've secured a net short position yourselves. So you're free to mark my swaps accurately for once because it's now in your interest to do so. Deeb: I'm not sure what you want me to say. Burry: I think that...I think that you've already said it.

Re: Why in the world would you own bonds?

#65

Post by anm89 » Wed, Mar 17, 2021, 4:50 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…

Wouldn't it be weirder if he didn't have his own advice on his own books?

Re: Why in the world would you own bonds?

#66

Post by anm89 » Wed, Mar 17, 2021, 4:51 AM UTC

DennisP wrote: post #34

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…

He doesn't recommend particular companies. Are you suggesting that Ray Dalio thinks he's so powerful that he can make Asian equities in general do better, just because he says he likes them?

A small Ray Dalio Flaps his wings in Connecticut and an Asian Small Cap beats its revenue forecast.

edit: For the record, i wrote this because it was fun. I'm not endorsing that this is the case.

Re: Why in the world would you own bonds?

#67

Post by aerovistae » Wed, Mar 17, 2021, 4:51 AM UTC

I discovered awhile ago that so-called "junk bonds" are in fact very rewarding investments that are actually only risky by comparison to other bonds, and not by comparison to other popular asset classes like stocks. Been making $120/year off an $800 bond I bought that has grown in value to $950. Win!

Re: Why in the world would you own bonds?

#68

Post by atombender » Wed, Mar 17, 2021, 4:52 AM UTC

obviouslynotme wrote: post #61

atombender wrote: post #48

Earlier quoted context omitted.

What happens to a bond when the Fed buys treasuries? Are they "cancelled"? Or does the Fed actually hold those bonds? The latter sounds nonsensical, but I don't know enough about how the Fed works.

The Fed isn't part of the US government. They are a private bank with special powers granted by Congress. When they purchase USG bonds, they hold them and receive interest.

But the Fed pays earnings back to the Treasury. And while the Fed is independent, it's certainly deeply intertwined with the US government. The Fed holding US government debt seems intuitively counterproductive to me.

Re: Why in the world would you own bonds?

#69

Post by anm89 » Wed, Mar 17, 2021, 4:52 AM UTC

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…

I mean sort of. Just staying as long bonds and bills as possible has barely lost for a quarter in the last half century.

As the article mentions that paradigm is probably over.

Re: Why in the world would you own bonds?

#70

Post by frongpik » Wed, Mar 17, 2021, 4:53 AM UTC

toomim wrote: post #27

nemothekid wrote: post #26

Earlier quoted context omitted.

Where would you go? The EU and Japan are already in a worse position than the US and if the US decides to commit to capital controls, they would probably follow. That only leaves China which already has capital controls.

> That only leaves China There are 195 different nations on earth. That leaves a lot more options than the EU, Japan, and China. A lot of crypto-expats are going to carribean island nations.

Small nations can't risk to offend the US.