Goldman Sachs says...

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jehovasfitness
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Goldman Sachs says...

Post by jehovasfitness » Sun Feb 25, 2018 1:47 pm

Thoughts?

Goldman Says Stocks May Plunge 25% If 10-Year Yield Hits 4. 5%

http://flip.it/9S0-av

minimalistmarc
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Re: Goldman Sachs says...

Post by minimalistmarc » Sun Feb 25, 2018 1:49 pm

May and if, they never commit to anything on wallstreet

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randomizer
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Re: Goldman Sachs says...

Post by randomizer » Sun Feb 25, 2018 1:51 pm

Run for the hills!
87.5:12.5 — HODL the course!

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cinghiale
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Re: Goldman Sachs says...

Post by cinghiale » Sun Feb 25, 2018 1:55 pm

Subtext:

“You, Mr. and Ms. Investor, need the expertise of Goldman Sachs to guide you through what could be some perilous periods in the stock market. Entrust us with your savings, because this isn’t something you can or should try to do on your own.”
"We don't see things as they are; we see them as we are." Anais Nin | | "Sometimes the first duty of intelligent men is the restatement of the obvious." George Orwell

david1082b
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Re: Goldman Sachs says...

Post by david1082b » Sun Feb 25, 2018 1:57 pm

Someone is predicting stock crashes and interest rate increases, same as in every other year.

Beehave
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Re: Goldman Sachs says...

Post by Beehave » Sun Feb 25, 2018 8:33 pm

The statement is a prediction of what would happen were interest rates to rise to a certain level. The important point not about a 4.5% rate but that under certain conditions bonds and stocks can go down together. This means that under certain conditions, bonds and stocks may not provide diversification. The 3-fund portfolio would suffer under these circumstances. It seems to me therefore that cash is a valid portfolio component, separate from bonds and stocks, precisely for this purpose.

The common response to this is that in general cash loses value over time relative to stocks and bonds. But the same can be said of bonds relative to stocks. The reason for bonds in addition to stocks is to be able to rebalance when stocks are down and bonds are up. In the GS scenario of falling stacks and bonds, cash serves exactly the purpose of an on-hand asset highly suitable for asset rebalancing (buying stocks and bonds whose prices have sunk).

My opinion, I'd be interested in others.

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BuyAndHoldOn
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Re: Goldman Sachs says...

Post by BuyAndHoldOn » Sun Feb 25, 2018 9:20 pm

Beehave wrote:
Sun Feb 25, 2018 8:33 pm
The statement is a prediction of what would happen were interest rates to rise to a certain level. The important point not about a 4.5% rate but that under certain conditions bonds and stocks can go down together. This means that under certain conditions, bonds and stocks may not provide diversification. The 3-fund portfolio would suffer under these circumstances. It seems to me therefore that cash is a valid portfolio component, separate from bonds and stocks, precisely for this purpose.

The common response to this is that in general cash loses value over time relative to stocks and bonds. But the same can be said of bonds relative to stocks. The reason for bonds in addition to stocks is to be able to rebalance when stocks are down and bonds are up. In the GS scenario of falling stacks and bonds, cash serves exactly the purpose of an on-hand asset highly suitable for asset rebalancing (buying stocks and bonds whose prices have sunk).

My opinion, I'd be interested in others.
You appear correct in your statements, at least to me.


I think this article is taking a hypothetical exercise performed by Goldman's researchers too far. The [researcher's ] point was to do a "stress test" of [simulated] markets and the economy if rates went WAY up. Not that the researcher(s) reasonably expect the 10-year at 4.5% any time/any time soon.

Also: Much of the real economy has a fixed rate of interest, so a sudden rise in interest rates is probably more of a Market-Risk scenario vs. Economic risk issue.

venkman
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Re: Goldman Sachs says...

Post by venkman » Sun Feb 25, 2018 9:49 pm

Beehave wrote:
Sun Feb 25, 2018 8:33 pm
The statement is a prediction of what would happen were interest rates to rise to a certain level. The important point not about a 4.5% rate but that under certain conditions bonds and stocks can go down together. This means that under certain conditions, bonds and stocks may not provide diversification. The 3-fund portfolio would suffer under these circumstances. It seems to me therefore that cash is a valid portfolio component, separate from bonds and stocks, precisely for this purpose.
Since its inception in 1987, the WORST calendar year for Vanguard's Total Bond Market index fund was a loss of 2.66%. I think most people with a 3-fund portfolio could appreciate one part of their portfolio being down only 3% when the stock portion was down 25% or more. That's still pretty good diversification, and bonds that were only down slightly could still be used to rebalance.

Over the long term, the opportunity cost of investing in cash rather than bonds will almost certainly be more than the gain one gets from holding cash instead of bonds for rebalancing.

stlutz
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Re: Goldman Sachs says...

Post by stlutz » Sun Feb 25, 2018 11:44 pm

Well, Morgan Stanley says the bear market in bonds is over.

https://www.bloomberg.com/news/articles ... -bond-call

rgs92
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Re: Goldman Sachs says...

Post by rgs92 » Mon Feb 26, 2018 3:14 am

By that logic, will stocks definitely go UP 25% if the 10-year-yield goes back down to 2%?

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EyeYield
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Re: Goldman Sachs says...

Post by EyeYield » Mon Feb 26, 2018 4:05 am

Don’t discount what GS says, they’re currently in 104th place in the Bogleheads contest. Now what does Taz say, he/she is currently in first place.
Don’t blink, ratings subject to change.

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fennewaldaj
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Re: Goldman Sachs says...

Post by fennewaldaj » Mon Feb 26, 2018 4:29 am

I would love for the 10 year treasury yield to hit 4.5% (while inflation is still low). While it would be painful in the short run it much better in the long run.

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Toons
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Re: Goldman Sachs says...

Post by Toons » Mon Feb 26, 2018 5:58 am

Sounds Great.
We could use a healthy bear market..
Part of the process.













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1nv35t
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Re: Goldman Sachs says...

Post by 1nv35t » Mon Feb 26, 2018 8:12 am

Goldman Says Stocks May Plunge 25% If 10-Year Yield Hits 4.5%
As would 30 year Treasury bond prices.

Maybe the yield curve will just flatten, as it has been doing. Where 0 to 10 year yields increase towards the 3% level. Maybe even invert, 4% at the shorter dated end, decaying down to a more flat line 3%.

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