Question: Jamie Dimon ( JPMorgan ) on Bonds

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swimfin
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Question: Jamie Dimon ( JPMorgan ) on Bonds

Post by swimfin » Thu Dec 06, 2018 4:31 pm

Today ( Dec 6 ), Jamie Dimon, CEO of JPMorgan, was interviewed on CNBC. He opined that the bond market was in a bubble and he would not buy US bonds ( I think he meant treasuries ).

What did he mean by that ? And what does it mean for the bond buying boglehead ?

Thesaints
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Re: Question: Jamie Dimon ( JPMorgan ) on Bonds

Post by Thesaints » Thu Dec 06, 2018 4:34 pm

Interest rates too low and don't buy longer-termed bonds, perhaps ?

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whodidntante
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Re: Question: Jamie Dimon ( JPMorgan ) on Bonds

Post by whodidntante » Thu Dec 06, 2018 10:12 pm

If you wish to profit from his prophecy, sell 10 year Treasury futures. Although you might get added to the road of bones built from every trader who tried to profit from speculation on interest rates or oil prices.

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nisiprius
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Re: Question: Jamie Dimon ( JPMorgan ) on Bonds

Post by nisiprius » Thu Dec 06, 2018 10:37 pm

On August 18th, 2010, Jeremy Schwartz and Jeremy Siegel wrote an article in The Wall Street Journal saying
Ten years ago we experienced the biggest bubble in U.S. stock market history—the Internet and technology mania that saw high-flying tech stocks selling at an excess of 100 times earnings. The aftermath was predictable: Most of these highfliers declined 80% or more, and the Nasdaq today sells at less than half the peak it reached a decade ago.

A similar bubble is expanding today that may have far more serious consequences for investors. It is in bonds, particularly U.S. Treasury bonds.
If you had invested $10,000 in the Vanguard Total Bond Market Index Fund on that date, you would now have $12,133. The growth chart looks like this:

Image

Notice that in a sense they were right--interest rates rose, within the range they said they were worried about, and the value of the bond fund did dip. Notice, too, that it didn't amount to much compared to the general loft in value provided by the steady interest payments paid out by the bonds in the fund.

And the answer is: it means nothing for a bond-buying Bogleheads. Do not act on guru opinions like those of Dimon. Just stay the course. First of all, they don't actually know. Second, without context, you have no idea how much of a problem they are talking about. Maybe he buys long-term bonds as part of some fragile leveraged structure that will come crashing down if there's a 5% decline in bond prices. Maybe he's worried about something that you won't even notice if it does happen.

And he might even have ulterior motives. Maybe he's trying to influence the Fed, or the market, to do something that will help JPMorgan. He's not your personal advisor. He hasn't signed a paper saying he'll act as fiduciary and put your interest above his.

Finally, whenever a guru says something, you can always find another credible guru who says the opposite.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: Question: Jamie Dimon ( JPMorgan ) on Bonds

Post by Grt2bOutdoors » Fri Dec 07, 2018 5:37 am

swimfin wrote:
Thu Dec 06, 2018 4:31 pm
Today ( Dec 6 ), Jamie Dimon, CEO of JPMorgan, was interviewed on CNBC. He opined that the bond market was in a bubble and he would not buy US bonds ( I think he meant treasuries ).

What did he mean by that ? And what does it mean for the bond buying boglehead ?
I suppose he wants viewers to deposit their money with him where he’ll pay you anywhere from 1 basis point to 1% and you should be happy to accept that because treasury bills are more risky than giving him “no cost to low funding” :oops:
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Question: Jamie Dimon ( JPMorgan ) on Bonds

Post by Call_Me_Op » Fri Dec 07, 2018 8:44 am

swimfin wrote:
Thu Dec 06, 2018 4:31 pm
Today ( Dec 6 ), Jamie Dimon, CEO of JPMorgan, was interviewed on CNBC. He opined that the bond market was in a bubble and he would not buy US bonds ( I think he meant treasuries ).

What did he mean by that ? And what does it mean for the bond buying boglehead ?
To me it means do not listen to CNBC. You need to learn about these things for yourself.

Think about it for a moment. If you buy a 2 year Treasury today, you will recieve about 2.8% interest each year and will get your principal back after the 2 years - come hell of high water. Now what is so bad about that?
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

Murgatroyd
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Re: Question: Jamie Dimon ( JPMorgan ) on Bonds

Post by Murgatroyd » Fri Dec 07, 2018 8:55 am

This is a perfect example of why bonds are so misunderstood. You can’t always be sure what the “experts” mean when they opine about them. Usually it’s about the capital appreciation aspect. But the rest of us look at total returns as well as their importance in balancing the portfolio and generating income.

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Re: Question: Jamie Dimon ( JPMorgan ) on Bonds

Post by HoosierJim » Fri Dec 07, 2018 9:05 am

nisiprius wrote:
Thu Dec 06, 2018 10:37 pm
If you had invested $10,000 in the Vanguard Total Bond Market Index Fund on that date, you would now have $12,133. The growth chart looks like this:
Help - How do you get a growth chart of a bond/fund/stock that includes distributions? Everything I see is always a price chart.

robertmcd
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Re: Question: Jamie Dimon ( JPMorgan ) on Bonds

Post by robertmcd » Fri Dec 07, 2018 10:35 am

If you want to lose everything I strongly suggest you short US long term treasuries.

You are going up against a debt monetizing goliath with a printer that has no limits.

Good luck.

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alec
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Re: Question: Jamie Dimon ( JPMorgan ) on Bonds

Post by alec » Fri Dec 07, 2018 12:23 pm

HoosierJim wrote:
Fri Dec 07, 2018 9:05 am
nisiprius wrote:
Thu Dec 06, 2018 10:37 pm
If you had invested $10,000 in the Vanguard Total Bond Market Index Fund on that date, you would now have $12,133. The growth chart looks like this:
Help - How do you get a growth chart of a bond/fund/stock that includes distributions? Everything I see is always a price chart.
Use the charts at www.morningstar.com.
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Re: Question: Jamie Dimon ( JPMorgan ) on Bonds

Post by White Coat Investor » Fri Dec 07, 2018 1:03 pm

swimfin wrote:
Thu Dec 06, 2018 4:31 pm
Today ( Dec 6 ), Jamie Dimon, CEO of JPMorgan, was interviewed on CNBC. He opined that the bond market was in a bubble and he would not buy US bonds ( I think he meant treasuries ).

What did he mean by that ? And what does it mean for the bond buying boglehead ?
It means Jamie, JPMorgan, and/or CNBC want you to believe they have a functioning crystal ball.

Do you believe it?
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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nisiprius
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Re: Question: Jamie Dimon ( JPMorgan ) on Bonds

Post by nisiprius » Fri Dec 07, 2018 1:04 pm

HoosierJim wrote:
Fri Dec 07, 2018 9:05 am
nisiprius wrote:
Thu Dec 06, 2018 10:37 pm
If you had invested $10,000 in the Vanguard Total Bond Market Index Fund on that date, you would now have $12,133. The growth chart looks like this:
Help - How do you get a growth chart of a bond/fund/stock that includes distributions? Everything I see is always a price chart.
1) How to use Morningstar growth charts

2) The fund company's own literature and website usually includes growth charts for their own funds, e.g. Price & Performance tab at Vanguard,

Image

3) Some brokerages, e.g. Fidelity, show growth charts for many funds--often these are really rebadged Morningstar charts, but it may be a more convenient place to find them.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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nisiprius
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Re: Question: Jamie Dimon ( JPMorgan ) on Bonds

Post by nisiprius » Fri Dec 07, 2018 1:07 pm

More generally, it means that Jamie Dimon says he is not buying bonds and wants you not to buy them, or to sell them.

Which is another way of saying he wants to see lower prices on bonds.

Which is another way of saying he wants to see higher yields and higher interest rates.

Who is his audience?

Maybe the Fed. Maybe you. Maybe both.

Whose interests is he serving? Surely JPMorgan. Possibly the general good of the nation. By coincidence, your interests might be aligned with his. Or might not.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

Pigeye Brewster
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Re: Question: Jamie Dimon ( JPMorgan ) on Bonds

Post by Pigeye Brewster » Fri Dec 07, 2018 4:11 pm

I didn't see the interview, but Bloomberg reported that Jamie Dimon said he wouldn't be a buyer of long-term Treasuries at current levels.

With the 10 year at 2.85% and the 30 year at 3.15%, I'd say the same thing. If anyone asked, that is. :beer

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Re: Question: Jamie Dimon ( JPMorgan ) on Bonds

Post by averagedude » Fri Dec 07, 2018 6:04 pm

I can remember in 1992 when Bill Clinton was elected president, all of the talking heads were talking about how pricey the stockmarket was. P/E ratios was near its highest levels in history. 1992 to 1999 was one of the strongest bull markets with multiple years of 20% annualized returns. There were some investors that stayed in cash, but in 1999 they couldn't stand it anymore and they got in, because it was the new economy and things are now different. We all know how that story ended for these people. Better to systematically invest, don't time the market, and ignore the financial news.

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Re: Question: Jamie Dimon ( JPMorgan ) on Bonds

Post by drk » Fri Dec 07, 2018 9:27 pm

When opinions like this pop up, it's worth noting whether the famous individual in question has a background in the subject matter. As far as I can tell, Jamie Dimon has no background in fixed income. Given that, I would not worry about his thoughts on the matter.

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Re: Question: Jamie Dimon ( JPMorgan ) on Bonds

Post by Java11 » Fri Dec 07, 2018 11:31 pm

Are these Morninstar growth charts before or after expenses?

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nisiprius
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Re: Question: Jamie Dimon ( JPMorgan ) on Bonds

Post by nisiprius » Sat Dec 08, 2018 7:41 am

Java11 wrote:
Fri Dec 07, 2018 11:31 pm
Are these Morninstar growth charts before or after expenses?
Growth charts, 1-3-5-10 performance numbers, virtually everything you see in mutual fund literature and just about anywhere is after expenses. That is, they represent the number of dollars you really would received if you redeemed the fund. I literally checked this once, in a brokerage account where I hadn't bought or sold anything in a while. (I'm sure this is because of some SEC regulation.) What you see is what you get.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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nisiprius
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Re: Question: Jamie Dimon ( JPMorgan ) on Bonds

Post by nisiprius » Sat Dec 08, 2018 8:53 am

Pigeye Brewster wrote:
Fri Dec 07, 2018 4:11 pm
....I didn't see the interview, but Bloomberg reported that Jamie Dimon said he wouldn't be a buyer of long-term Treasuries at current levels....
This can't be said too often. Vague references to "bonds" in the financial news often mean
  • long-term Treasury bonds (as opposed to "notes" or "bills"), and
  • their price movements
  • in the short term.

The typical Boglehead retirement saver is interested in
  • average intermediate-term bonds, and
  • their total return
  • in the long term.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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