Cheery William Bernstein insight after gloomy week

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ralphjones
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Cheery William Bernstein insight after gloomy week

Post by ralphjones » Sun Mar 01, 2020 4:53 pm

Catching up with a transcript of William Bernstein interview 2019 - https://ritholtz.com/2019/04/transcript-bill-bernstein - on what to do with your money :

‘And then there’s the stuff which you’re not really going to be touching, or shouldn’t be touching, for decades, and that’s the risky stuff … Corporate bonks, in general, I think are a mistake.'

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imak
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Re: Cheery William Bernstein insight after gloomy week

Post by imak » Sun Mar 01, 2020 5:39 pm

Thanks for posting this episode. I am a fan of Masters in Business podcast. It has amazing guests and deep conversations on economics and investing. Similar to this one, you might also enjoy Barry Ritholtz's conversation with Cliff Asness of AQR (a quant hedge fund).

https://ritholtz.com/2015/02/masters-in ... anagement/
Asset Allocation: 30% FNDX, 30% FNDA, 10% FNDF, 10% FNDC, 10% REET, 10% EDV; EF=VTEB; "Discipline matters more than allocation" ~ W Bernstein

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digarei
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Re: Cheery William Bernstein insight after gloomy week

Post by digarei » Sun Mar 01, 2020 5:49 pm

ralphjones wrote:
Sun Mar 01, 2020 4:53 pm
Catching up with a transcript of William Bernstein interview 2019 - https://ritholtz.com/2019/04/transcript-bill-bernstein - on what to do with your money :

‘And then there’s the stuff which you’re not really going to be touching, or shouldn’t be touching, for decades, and that’s the risky stuff … Corporate bonks, in general, I think are a mistake.'
Provocative, interesting, I get. However, I can’t recall the last time the word “cheery” was associated with William Bernstein! :D

And—forgive me if I’m missing it, but what exactly is the cheerful insight offered here by Mr Bernstein? It doesn’t seem to be captured in the quote unless it’s the maddeningly oblique assertion that “Corporate bonks [sic] […] are a mistake.”

Okay. Forewarned is forearmed. I’ll unload my position in Vanguard Total Bond Market first thing Monday morning, and buy Treasuries.

Happy now?
Connect with Bogleheads in Northern California! Click the link under my user info/avatar.

delamer
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Re: Cheery William Bernstein insight after gloomy week

Post by delamer » Sun Mar 01, 2020 6:41 pm

digarei wrote:
Sun Mar 01, 2020 5:49 pm
ralphjones wrote:
Sun Mar 01, 2020 4:53 pm
Catching up with a transcript of William Bernstein interview 2019 - https://ritholtz.com/2019/04/transcript-bill-bernstein - on what to do with your money :

‘And then there’s the stuff which you’re not really going to be touching, or shouldn’t be touching, for decades, and that’s the risky stuff … Corporate bonks, in general, I think are a mistake.'
Provocative, interesting, I get. However, I can’t recall the last time the word “cheery” was associated with William Bernstein! :D

And—forgive me if I’m missing it, but what exactly is the cheerful insight offered here by Mr Bernstein? It doesn’t seem to be captured in the quote unless it’s the maddeningly oblique assertion that “Corporate bonks [sic] […] are a mistake.”

Okay. Forewarned is forearmed. I’ll unload my position in Vanguard Total Bond Market first thing Monday morning, and buy Treasuries.

Happy now?
Bernstein’s belief is that corporate America’s decision makers are focused on stock prices, which drive the way they run their businesses. Corporate bonds don’t.

Therefore, buy government bonds rather than corporate bonds. Because why take the risk associated with corporate bonds relative to government bonds? Take your risk with stocks.

You may not agree, but it is a reasonable perspective.

BoggledUp
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Re: Cheery William Bernstein insight after gloomy week

Post by BoggledUp » Sun Mar 01, 2020 7:00 pm

ralphjones wrote:
Sun Mar 01, 2020 4:53 pm

… Corporate bonks, in general, I think are a mistake.
Wisdom for the ages, I think we can all agree :P

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watchnerd
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Re: Cheery William Bernstein insight after gloomy week

Post by watchnerd » Sun Mar 01, 2020 7:04 pm

delamer wrote:
Sun Mar 01, 2020 6:41 pm


Therefore, buy government bonds rather than corporate bonds. Because why take the risk associated with corporate bonds relative to government bonds? Take your risk with stocks.

You may not agree, but it is a reasonable perspective.
I agree, and have been practicing it for quite some time.

I just wish Vanguard would make a total Treasury market fund.

The closest I know of to a total Treasury market fund is the iShares ETF, GOVT.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

btenny
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Re: Cheery William Bernstein insight after gloomy week

Post by btenny » Sun Mar 01, 2020 7:05 pm

Thanks for the link. It is a very good interview and discussion. Read the last few pages for a great outlook on investing in stocks, especially if you are retired and or approaching "geezerhood".

"But once you’re approaching your geezerhood (ph), stocks are Three Mile Island toxic and you should be very — approach them with great degree of caution."

But if you are young and working he recommends mostly stocks.

" I wished I had known when I was 30-years-old that I could put 100 percent of my savings into stocks and not worry at all about them."

petulant
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Re: Cheery William Bernstein insight after gloomy week

Post by petulant » Sun Mar 01, 2020 7:26 pm

Thing is, if this were really true, then the market should figure it out, then the spread on corporate bonds would rise until the yields are attractive enough to include in a portfolio. Unless there's some kind of anomaly here.

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watchnerd
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Re: Cheery William Bernstein insight after gloomy week

Post by watchnerd » Sun Mar 01, 2020 7:34 pm

petulant wrote:
Sun Mar 01, 2020 7:26 pm
Thing is, if this were really true, then the market should figure it out, then the spread on corporate bonds would rise until the yields are attractive enough to include in a portfolio. Unless there's some kind of anomaly here.
The anomaly is the precedent set by bailing out AIG, GM, etc.

Welcome to the consequences of "moral hazard".
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

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Re: Cheery William Bernstein insight after gloomy week

Post by digarei » Sun Mar 01, 2020 7:39 pm

delamer wrote:
Sun Mar 01, 2020 6:41 pm

Bernstein’s belief is that corporate America’s decision makers are focused on stock prices, which drive the way they run their businesses. Corporate bonds don’t.

Therefore, buy government bonds rather than corporate bonds. Because why take the risk associated with corporate bonds relative to government bonds? Take your risk with stocks.

You may not agree, but it is a reasonable perspective.
Yes, a reasonable perspective. I believe the logical conclusion to this view is adoption of a barbell risk strategy. The riskiest stocks combined with the safest bonds. US Treasuries have certainly proven to be of tremendous value in times of economic duress and market decline. It’s a conservative position for those hungry for returns.

I’m basically a slicer & dicer in regard to both fixed income and equities. Own a bit of everything. This makes me I think a cautious optimist—or an implacable egalitarian. Sleep Well At Night (SWAN) means different things to different people. I’m not as concerned with spectacular returns or apocalyptic failure since I think both outcomes are of low probability. 30% corporate bonds never killed anybody [‘s retirement dreams].
Connect with Bogleheads in Northern California! Click the link under my user info/avatar.

delamer
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Re: Cheery William Bernstein insight after gloomy week

Post by delamer » Tue Mar 03, 2020 3:48 pm

digarei wrote:
Sun Mar 01, 2020 7:39 pm
delamer wrote:
Sun Mar 01, 2020 6:41 pm

Bernstein’s belief is that corporate America’s decision makers are focused on stock prices, which drive the way they run their businesses. Corporate bonds don’t.

Therefore, buy government bonds rather than corporate bonds. Because why take the risk associated with corporate bonds relative to government bonds? Take your risk with stocks.

You may not agree, but it is a reasonable perspective.
Yes, a reasonable perspective. I believe the logical conclusion to this view is adoption of a barbell risk strategy. The riskiest stocks combined with the safest bonds. US Treasuries have certainly proven to be of tremendous value in times of economic duress and market decline. It’s a conservative position for those hungry for returns.

I’m basically a slicer & dicer in regard to both fixed income and equities. Own a bit of everything. This makes me I think a cautious optimist—or an implacable egalitarian. Sleep Well At Night (SWAN) means different things to different people. I’m not as concerned with spectacular returns or apocalyptic failure since I think both outcomes are of low probability. 30% corporate bonds never killed anybody [‘s retirement dreams].
I, on the other hand, have a higher stock allocation than typical (for my age/circumstances) in part because I don’t have any corporate bonds in my portfolio.

So yes, people approach these decisions differently based on their situations.

TedSwippet
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Re: Cheery William Bernstein insight after gloomy week

Post by TedSwippet » Tue Mar 03, 2020 4:04 pm

BoggledUp wrote:
Sun Mar 01, 2020 7:00 pm
ralphjones wrote:
Sun Mar 01, 2020 4:53 pm

… Corporate bonks, in general, I think are a mistake.
Wisdom for the ages, I think we can all agree :P
Brilliant. :-) For those not following, outside of the US, 'bonk' has another use that is informal and altogether different from its conventional meaning.

bayview
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Re: Cheery William Bernstein insight after gloomy week

Post by bayview » Tue Mar 03, 2020 4:44 pm

delamer wrote:
Tue Mar 03, 2020 3:48 pm
digarei wrote:
Sun Mar 01, 2020 7:39 pm
delamer wrote:
Sun Mar 01, 2020 6:41 pm

Bernstein’s belief is that corporate America’s decision makers are focused on stock prices, which drive the way they run their businesses. Corporate bonds don’t.

Therefore, buy government bonds rather than corporate bonds. Because why take the risk associated with corporate bonds relative to government bonds? Take your risk with stocks.

You may not agree, but it is a reasonable perspective.
Yes, a reasonable perspective. I believe the logical conclusion to this view is adoption of a barbell risk strategy. The riskiest stocks combined with the safest bonds. US Treasuries have certainly proven to be of tremendous value in times of economic duress and market decline. It’s a conservative position for those hungry for returns.

I’m basically a slicer & dicer in regard to both fixed income and equities. Own a bit of everything. This makes me I think a cautious optimist—or an implacable egalitarian. Sleep Well At Night (SWAN) means different things to different people. I’m not as concerned with spectacular returns or apocalyptic failure since I think both outcomes are of low probability. 30% corporate bonds never killed anybody [‘s retirement dreams].
I, on the other hand, have a higher stock allocation than typical (for my age/circumstances) in part because I don’t have any corporate bonds in my portfolio.

So yes, people approach these decisions differently based on their situations.
Same here. I was first introduced to this idea in Larry Swedroe’s writings.
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

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