Bonds protect against stock market downtimes

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Elysium
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Bonds protect against stock market downtimes

Post by Elysium »

There has been many threads here lately asking why own bonds since it's almost certain rates are going up and bonds are going to produce negative returns, especially after inflation which a lot of people based on recent reports believe is going to stay high.

Today is a good reminder about why we own bonds. S&P 500 down -2.18%, Long Term Bonds up +2.3%, Total Bond up 0.71%

Bonds are for protecting portfolios against days like this, of which there can be many more, and they come without warning. An appropriate allocation to bonds can keep us prepared to face equity drawdowns. Stocks can lose a lot of money in just a few trading days, while bonds may not as much in one year that stocks can lose in just a week of sell off.
000
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Re: Bonds protect against stock market downtimes

Post by 000 »

Bonds are a risk asset, not a stock hedge. Put options protect against stock market downturns.

What about a future crisis related to fear (whether or not rational) over inflation or the creditworthiness of major issuers in bond indices?
tibbitts
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Re: Bonds protect against stock market downtimes

Post by tibbitts »

Although we haven't seen a lot of examples lately, both stocks and bonds can drop simultaneously. For example, an unanticipated rise in rates might cause both to fall.
am
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Re: Bonds protect against stock market downtimes

Post by am »

Elysium wrote: Fri Nov 26, 2021 10:02 pm There has been many threads here lately asking why own bonds since it's almost certain rates are going up and bonds are going to produce negative returns, especially after inflation which a lot of people based on recent reports believe is going to stay high.

Today is a good reminder about why we own bonds. S&P 500 down -2.18%, Long Term Bonds up +2.3%, Total Bond up 0.71%

Bonds are for protecting portfolios against days like this, of which there can be many more, and they come without warning. An appropriate allocation to bonds can keep us prepared to face equity drawdowns. Stocks can lose a lot of money in just a few trading days, while bonds may not as much in one year that stocks can lose in just a week of sell off.
Seems short sighted. So you own a losing asset in real terms so that you could reduce downside volatility at the cost of long term returns? Maybe if your a retiree drawing down your portoflio without much wiggle room?
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kelway
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Re: Bonds protect against stock market downtimes

Post by kelway »

Elysium wrote: Fri Nov 26, 2021 10:02 pm Today is a good reminder about why we own bonds. S&P 500 down -2.18%, Long Term Bonds up +2.3%, Total Bond up 0.71%
Sure - I get the point, but then let's be sure to also consider YTD for each at the end of this same day.
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Re: Bonds protect against stock market downtimes

Post by Forester »

All of us are guessing what are the correct bond funds to own. And most of us refer only to recent decades when interest rates have been declining. Across my investment accounts I own global govt bonds, global inflation-indexed bonds, and gold. I would never state "bonds are for safety" or "gold is for safety". None of the investment instruments we own, were designed primarily to support retirement. Government bonds don't exist to complement public stocks, that was never the intention.
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Re: Bonds protect against stock market downtimes

Post by BionicBillWalsh »

The argument for bonds is not compelling to me.

I continue to have about 20% of my portfolio in them but most days feel it’s 20% too much.
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Johnathon Livingston
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Re: Bonds protect against stock market downtimes

Post by Johnathon Livingston »

Treasuries provide downside risk protection but at the cost of increasing upside risk. The upside risk wasn’t as big if a deal when you could expect an average 6% return on treasuries, but now it’s a significant consideration.
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Re: Bonds protect against stock market downtimes

Post by dbr »

Bonds don't "protect" against stock downturns in the sense of offsetting a downturn even if the returns are in the opposite direction, which is sometimes the case and sometimes not.

Bonds do dilute the volatility of a portfolio in proportion to what is allocated. Expected return is also diluted. This, of course, is what people own bonds for.

There can be a small effect of true diversification due to lack of correlation between stocks and bonds. To make this of much use the bonds have to be volatile and of high expected return, meaning that the only real chance of diversifying stocks in that sense would be long bonds, Treasuries in particular.

The YTD return of long Treasuries is currently -3.56% (VUSTX), of intermediate Treasuries -2.05% (VBILX) and of S&P 500 +23.87% (VFIAX)

As to correlations, there is a -.30 correlation between VUSTX and VFIAX now, but if the bonds are total bond index VBMFX the correlation is only -.08.
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Re: Bonds protect against stock market downtimes

Post by texasfight »

nominal treasury bonds are no longer a real return play (as they were for past 2 decades which made risk parity do incredibly well) due to the new paradigm of fiscal stimulus + monetary policy intended to create economic growth at the expense of bondholders.

They are now more of just a hedge, with negative real returns over the long run, but positive return over cash (remember an asset with a negative return even vs cash can still improve portfolio performance if it is negatively correlated to other asset classes in your portfolio).

I still hold nominal bonds (and everyone should), but the game was changed in April 2020 with the Fed + gov policy, and boy am I glad I changed my portfolio design before bonds get steamrolled.

TIPS and broad commodities have taken up a large portion.

Most of this forum completely abandoned all inflation protection asset classes after they failed to hedge what they were never intended to hedge for a decade (low inflation low growth).

Guess what this forum was considering abandoning back in March 2021 right when 30 yr yields topped.

Own a diversified portfolio of stocks, bonds, and inflation protection. Don't get yourself in a liquidity crunch where you have to sell low, and you will be fine.
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Re: Bonds protect against stock market downtimes

Post by Robot Monster »

tibbitts wrote: Fri Nov 26, 2021 10:18 pm Although we haven't seen a lot of examples lately, both stocks and bonds can drop simultaneously. For example, an unanticipated rise in rates might cause both to fall.
Completely agree that bonds would not protect against a stock market downturn in a rate shock scenario. Especially not Long Term Bonds! They may be up +2.3% yesterday (my 30yr TIPS went up almost 3%) but in a rate shock those suckers would tank hard.

I just want to note that higher bond yields might actually be good for the long-term bond investor. See Nisiprius's post, "Short- and longer-term effects of rising interest rates on a bond fund" link
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Re: Bonds protect against stock market downtimes

Post by texasfight »

Robot Monster wrote: Sat Nov 27, 2021 9:53 am
tibbitts wrote: Fri Nov 26, 2021 10:18 pm Although we haven't seen a lot of examples lately, both stocks and bonds can drop simultaneously. For example, an unanticipated rise in rates might cause both to fall.
A rate shock would cause bonds to drop in the short-run, but it's important to note that higher bond yields might actually be good for the long-term bond investor. See Nisiprius's post, "Short- and longer-term effects of rising interest rates on a bond fund" link
Long DXY has done more to hedge equity drawdowns than nominal treasuries this year. VTI is very tech heavy, QQQ even more so, and both trade as real rates plays. Which is why we get the bad news is good news dynamic in markets (QQQ and treasuries rip and DOW sells off on bad econ data cause it means Fed will not tighten as much = lower real rates).

Higher inflation is causing DXY to rise due to US economy being stronger than pretty much anywhere else. We have more good inflation than any other economy right now (we also have some bad inflation - the kind that makes stocks drop due to margin compression - saw this effect a month ago when Amazon warned about Q4).

The DXY spikes have mainly come on long term breakevens crashing on rising front end nominal rates.

However, all of the drawdowns have been so small this year that it really is not something to be worried about when it comes to hedging against, unless you are using leverage. I am, so I add UUP and RYSBX.

To summarize, yes treasuries have failed to hedge most of the big red equity days this year, but if you absolutely need to bonds to soar when stocks drop 1.5% you have much bigger problems when it comes to being a DIY investor. YOU HAVE TO TAKE DRAWDOWNS TO MAKE MONEY!!!

Wake me up when treasury bonds don't hedge a 25% equity correction. That is when it matter, not cute little tantrums that happen every 1-3 months.
Last edited by texasfight on Sat Nov 27, 2021 10:37 am, edited 1 time in total.
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Re: Bonds protect against stock market downtimes

Post by texasfight »

Robot Monster wrote: Sat Nov 27, 2021 9:53 am
tibbitts wrote: Fri Nov 26, 2021 10:18 pm Although we haven't seen a lot of examples lately, both stocks and bonds can drop simultaneously. For example, an unanticipated rise in rates might cause both to fall.
Completely agree that bonds would not protect against a stock market downturn in a rate shock scenario. Especially not Long Term Bonds! They may be up +2.3% yesterday (my 30yr TIPS went up almost 3%) but in a rate shock those suckers would tank hard.

I just want to note that higher bond yields might actually be good for the long-term bond investor. See Nisiprius's post, "Short- and longer-term effects of rising interest rates on a bond fund" link
Fed/Treasury have been installing tools to prevent this from happening again (see new SRF). If you think it will, add UUP or RYSBX.

I was running risk parity into Covid crash, got smoked with a 15% drop in one day, lost more than a years salary in a day, but why was I completely okay?

Because I was not running leverage (just VTI + EDV) I didn't have to sell low due to a one week liquidity crisis. In fact I even doubled down and sold all my stocks without capital gains to buy LTPZ and TLT at 10% discounts to NAV cause I saw what was happening. I said to myself that it is mathematically impossible that the value of these guaranteed cash flows from US gov would drop due to economy getting massacred (we thought we were headed to a great depression level of deflation, and we would have without Fed/fiscal).

When we passed the stimulus checks/unemployment/PPP, etc. I realized that we were preventing a solvency crisis at the expense of nominal bond holders. I rewrote my entire asset allocation and am so glad I did. Someone I know has gotten steamrolled for refusing to ever sell his massive treasury position (economy is still screwed in his opinion, etc.) I told him monetized fiscal stimulus has changed the game and rendered the philips curve obsolete.
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Re: Bonds protect against stock market downtimes

Post by rockstar »

000 wrote: Fri Nov 26, 2021 10:17 pm Bonds are a risk asset, not a stock hedge. Put options protect against stock market downturns.

What about a future crisis related to fear (whether or not rational) over inflation or the creditworthiness of major issuers in bond indices?
Worse case is you buy bonds to hedge against a downturn and they don't respond. Right now, they're still responding. But if you want to know how much you can sell your equities for at a future date despite a downturn, put options make more sense.
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Re: Bonds protect against stock market downtimes

Post by Elysium »

Investors have been lulled into a false sense of security with minimal drawdowns in equities for the past decade, there was one brief pullback in March 2020, which was violet, but recovered quickly by fed actions and the trillions in stimulus after. The idea that bonds give nothing and stocks do so long as you hold it long term ignoring short term volatility stems from this recency bias.

Bonds at 1.5% for 10 year treasury bought and held to maturity will provide 1.5% guaranteed, principal & interest, on maturity in 10 years. Stocks could return nothing, or negative in 10 years, as they did from 2000-09. Stocks can drop 50% and take a decade or more to recover, and a recovery is not guaranteed. Bonds guarantee something.

As for inflation, everyone seems to be an expert these days on what it's going to be, in reality no one knows, a the world is a very uncertain place, there could be minimal inflation, high inflation, disinflation, or deflation. Stocks could return even less in real terms, since they can return ZERO to -ve over next decade. Bonds could provide positive real returns starting from today 10 year out at 1.5% rate, that is a very real possibility.

Covid induced disruption in market is not gone, equity drawdown of March 2020 was temporarily halted, no one knows when the levies could break again, look at commodity prices that dropped like a rock yesterday, all it takes is one bad turn of events and poof.... inflation goes negative, growth goes negative, rates are headed down.

Bonds are for safety, an appropriate allocation to bonds helps portfolio from completely going under.
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Elysium
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Re: Bonds protect against stock market downtimes

Post by Elysium »

Another good day for bonds when stocks fell sharply. S&P 500 down -1.9% LTT up +1.52% Total Bond up +0.19%.
Explorer
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Re: Bonds protect against stock market downtimes

Post by Explorer »

Elysium wrote: Tue Nov 30, 2021 8:40 pm Another good day for bonds when stocks fell sharply. S&P 500 down -1.9% LTT up +1.52% Total Bond up +0.19%.
At the current yields, I would not own any of the bonds: short, intermediate or long. I would instead prefer cash as my shock absorber, I am simply carrying a higher cash level than usual to give me the "margin of safety" in absorbing equity shocks.

Once/if the yields climb much higher I would reconsider bonds.
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Re: Bonds protect against stock market downtimes

Post by Triple digit golfer »

Explorer wrote: Tue Nov 30, 2021 8:51 pm
Elysium wrote: Tue Nov 30, 2021 8:40 pm Another good day for bonds when stocks fell sharply. S&P 500 down -1.9% LTT up +1.52% Total Bond up +0.19%.
At the current yields, I would not own any of the bonds: short, intermediate or long. I would instead prefer cash as my shock absorber, I am simply carrying a higher cash level than usual to give me the "margin of safety" in absorbing equity shocks.

Once/if the yields climb much higher I would reconsider bonds.
Do you really expect cash to have a higher return than a total bond fund over 6-7 years?
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Re: Bonds protect against stock market downtimes

Post by Explorer »

Triple digit golfer wrote: Tue Nov 30, 2021 9:04 pm
Explorer wrote: Tue Nov 30, 2021 8:51 pm
Elysium wrote: Tue Nov 30, 2021 8:40 pm Another good day for bonds when stocks fell sharply. S&P 500 down -1.9% LTT up +1.52% Total Bond up +0.19%.
At the current yields, I would not own any of the bonds: short, intermediate or long. I would instead prefer cash as my shock absorber, I am simply carrying a higher cash level than usual to give me the "margin of safety" in absorbing equity shocks.

Once/if the yields climb much higher I would reconsider bonds.
Do you really expect cash to have a higher return than a total bond fund over 6-7 years?
No, I expect the rate hike cycle to last maybe a year or two. Once yields are higher and begin to plateau bonds become attractive for an entry point.
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Re: Bonds protect against stock market downtimes

Post by Triple digit golfer »

Explorer wrote: Tue Nov 30, 2021 9:17 pm
Triple digit golfer wrote: Tue Nov 30, 2021 9:04 pm
Explorer wrote: Tue Nov 30, 2021 8:51 pm
Elysium wrote: Tue Nov 30, 2021 8:40 pm Another good day for bonds when stocks fell sharply. S&P 500 down -1.9% LTT up +1.52% Total Bond up +0.19%.
At the current yields, I would not own any of the bonds: short, intermediate or long. I would instead prefer cash as my shock absorber, I am simply carrying a higher cash level than usual to give me the "margin of safety" in absorbing equity shocks.

Once/if the yields climb much higher I would reconsider bonds.
Do you really expect cash to have a higher return than a total bond fund over 6-7 years?
No, I expect the rate hike cycle to last maybe a year or two. Once yields are higher and begin to plateau bonds become attractive for an entry point.
Good luck with that.
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Re: Bonds protect against stock market downtimes

Post by Ed 2 »

Explorer wrote: Tue Nov 30, 2021 9:17 pm
Triple digit golfer wrote: Tue Nov 30, 2021 9:04 pm
Explorer wrote: Tue Nov 30, 2021 8:51 pm
Elysium wrote: Tue Nov 30, 2021 8:40 pm Another good day for bonds when stocks fell sharply. S&P 500 down -1.9% LTT up +1.52% Total Bond up +0.19%.
At the current yields, I would not own any of the bonds: short, intermediate or long. I would instead prefer cash as my shock absorber, I am simply carrying a higher cash level than usual to give me the "margin of safety" in absorbing equity shocks.

Once/if the yields climb much higher I would reconsider bonds.
Do you really expect cash to have a higher return than a total bond fund over 6-7 years?
No, I expect the rate hike cycle to last maybe a year or two. Once yields are higher and begin to plateau bonds become attractive for an entry point.
How about if rate hikes will be about not a year or two but 5-10 years? Do you aware how long it took fed to bring rates as low as they are at this point?
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Re: Bonds protect against stock market downtimes

Post by 000 »

Elysium wrote: Tue Nov 30, 2021 8:40 pm Another good day for bonds when stocks fell sharply. S&P 500 down -1.9% LTT up +1.52% Total Bond up +0.19%.
To me those numbers show that a product like total bond really does not hedge stock risk.

You would have needed almost 91% total bond (really 10/11) to fully counteract the movement of 9% (really 1/11) stocks today.

Of course LTT has plenty of risk and headwind.
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Re: Bonds protect against stock market downtimes

Post by Explorer »

Triple digit golfer wrote: Tue Nov 30, 2021 9:18 pm
Explorer wrote: Tue Nov 30, 2021 9:17 pm
Triple digit golfer wrote: Tue Nov 30, 2021 9:04 pm
Explorer wrote: Tue Nov 30, 2021 8:51 pm
Elysium wrote: Tue Nov 30, 2021 8:40 pm Another good day for bonds when stocks fell sharply. S&P 500 down -1.9% LTT up +1.52% Total Bond up +0.19%.
At the current yields, I would not own any of the bonds: short, intermediate or long. I would instead prefer cash as my shock absorber, I am simply carrying a higher cash level than usual to give me the "margin of safety" in absorbing equity shocks.

Once/if the yields climb much higher I would reconsider bonds.
Do you really expect cash to have a higher return than a total bond fund over 6-7 years?
No, I expect the rate hike cycle to last maybe a year or two. Once yields are higher and begin to plateau bonds become attractive for an entry point.
Good luck with that.
Good luck to you too...
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Re: Bonds protect against stock market downtimes

Post by Explorer »

Ed 2 wrote: Tue Nov 30, 2021 9:24 pm
Explorer wrote: Tue Nov 30, 2021 9:17 pm
Triple digit golfer wrote: Tue Nov 30, 2021 9:04 pm
Explorer wrote: Tue Nov 30, 2021 8:51 pm
Elysium wrote: Tue Nov 30, 2021 8:40 pm Another good day for bonds when stocks fell sharply. S&P 500 down -1.9% LTT up +1.52% Total Bond up +0.19%.
At the current yields, I would not own any of the bonds: short, intermediate or long. I would instead prefer cash as my shock absorber, I am simply carrying a higher cash level than usual to give me the "margin of safety" in absorbing equity shocks.

Once/if the yields climb much higher I would reconsider bonds.
Do you really expect cash to have a higher return than a total bond fund over 6-7 years?
No, I expect the rate hike cycle to last maybe a year or two. Once yields are higher and begin to plateau bonds become attractive for an entry point.
How about if rate hikes will be about not a year or two but 5-10 years? Do you aware how long it took fed to bring rates as low as they are at this point?
Simple. As long as rate hikes continue stay away from high grade bonds.. bonds are a losing proposition for the immediate future. Whether one likes it or not based on dogma, the reality is that high grade bonds no longer have the shock absorbing effect (at any duration) due to the flat yield curve hugging the zero line. We just need to see things for what they are.
Last edited by Explorer on Wed Dec 01, 2021 5:56 am, edited 1 time in total.
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Re: Bonds protect against stock market downtimes

Post by loukycpa »

I own stable value funds, EE & I bonds, and total bond fund. As a conservative investor and a near future early retiree, the reason I own them is simply to prevent me from having to sell equities at a time and a price I don’t want to have to sell equities to keep my family warm, fed and dry. I don’t want to own any more than I have to to achieve that objective. I expect to mostly spend down my fixed income before I reach age 70 (delayed SS).

The EE and I bonds are what I plan to continue to add to and also to draw down last. I would be content to have only I bonds in the current interest rate environment, but with the 10k annual purchase limit and lack of taxable space I expect it will be a long time before I would get anywhere close to that position.

Currently have about 5X expenses in stable value, 5X in total bond, and 2X in EE/I bonds.
Last edited by loukycpa on Wed Dec 01, 2021 9:01 am, edited 4 times in total.
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Re: Bonds protect against stock market downtimes

Post by Explorer »

loukycpa wrote: Wed Dec 01, 2021 5:50 am I own stable value funds, EE & I bonds, and total bond fund. As a future early retiree, the reason I own them is simply to prevent me from having to sell equities at a time and a price I don’t want to have to sell equities to keep my family warm, fed and dry. I don’t want to own any more than I have to to achieve that objective. I expect to mostly spend down my fixed income before I reach age 70 (delayed SS).
good approach - particularly stable value funds - I use that extensively in my 401(K) as bond proxy currently yielding 2%+ annually with no impact on NAV.
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Re: Bonds protect against stock market downtimes

Post by Elysium »

Another day stocks are down and bonds are up.
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Re: Bonds protect against stock market downtimes

Post by Robot Monster »

Elysium wrote: Wed Dec 01, 2021 3:11 pm Another day stocks are down and bonds are up.
I kind feel like BND's +0.06% isn't really much to write home about. EDV's +0.82% fared much better.

But, making generalizations using a day here and there might not be the best thing.
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Re: Bonds protect against stock market downtimes

Post by GaryA505 »

Bonds don't protect against stock market downturns, they just reduce your drawdown during a stock market downturn.

Of course, if you are inclined to sell stock in a stock market downturn, bonds may protect you from YOUR OWN BEHAVIOR!
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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Elysium
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Re: Bonds protect against stock market downtimes

Post by Elysium »

1 month:
TLT: 3.20%
IEF: 0.42%
SPY: -0.88%

Bonds protect when stocks take a dip. No guarantees it should happen every single time, but it has happened before and it is happening now. I've been a buyer of bonds throughout this year and happy that I have enough in them to serve as ballast against stock market volatility.
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Re: Bonds protect against stock market downtimes

Post by 000 »

Elysium wrote: Wed Dec 01, 2021 3:11 pm Another day stocks are down and bonds are up.
BND was down today
Northern Flicker
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Re: Bonds protect against stock market downtimes

Post by Northern Flicker »

000 wrote: Fri Nov 26, 2021 10:17 pm Bonds are a risk asset, not a stock hedge. Put options protect against stock market downturns.

What about a future crisis related to fear (whether or not rational) over inflation or the creditworthiness of major issuers in bond indices?
put options have negative carry. bonds have positive carry.
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Re: Bonds protect against stock market downtimes

Post by Caduceus »

That argument is true only if you're re-deploying the money in bonds into stocks during periods where stocks are down, otherwise, the "protection" doesn't exist because over some long-enough investment horizon where stocks outperform bonds, you'd still be underperforming.
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Re: Bonds protect against stock market downtimes

Post by 000 »

Northern Flicker wrote: Wed Dec 01, 2021 11:36 pm put options have negative carry. bonds have positive carry.
Is the latter part still true at negative real yields? What about negative nominal yields as in some other developed markets?

How much of a drag, really, are deeply OTM options compared to huge bond allocations?

SPY is currently trading at $451.99 and a Dec 22 $225 put (just under 50% of $451.99) trades at $3.25, which is 0.72% of $451.99.

How much does 0.72% compare to the expected return cost of putting (lol) 50% of your portfolio in bonds?
Last edited by 000 on Thu Dec 02, 2021 12:30 am, edited 1 time in total.
Northern Flicker
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Re: Bonds protect against stock market downtimes

Post by Northern Flicker »

000 wrote: Thu Dec 02, 2021 12:25 am
Northern Flicker wrote: Wed Dec 01, 2021 11:36 pm put options have negative carry. bonds have positive carry.
Is the latter part still true at negative real yields?
Yes. Negative carry means you pay to hold the investment. Positive carry means you earn something by holding the investment. the put option may have a positive or negative real return as an outcome. Fixed income is not a particularly attractive diversifier for equity risk right now. The vast majority of alternatives are worse.
Last edited by Northern Flicker on Thu Dec 02, 2021 12:36 am, edited 1 time in total.
000
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Re: Bonds protect against stock market downtimes

Post by 000 »

Northern Flicker wrote: Thu Dec 02, 2021 12:29 am
000 wrote: Thu Dec 02, 2021 12:25 am
Northern Flicker wrote: Wed Dec 01, 2021 11:36 pm put options have negative carry. bonds have positive carry.
Is the latter part still true at negative real yields?
yes. it just means that the negative carry in nominal terms is even greater in real terms.
Only if you assume the options market is fairly priced wrt the bond market, which I don't given the presence of an 800 lb gorilla in the latter and the propensity of investors to underestimate black swans.
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Re: Bonds protect against stock market downtimes

Post by Northern Flicker »

The problem is that you don't know how long it will be before the sequence of expiring put options pay anything out.

Traditionally, you could hedge the market by purchasing a call (say 1 year leap) with say 5% of a portfolio, and put the other 95% in t-bills to earn interest to cover the cost of the option. If t-bill yields are at 5.26% this gives you about 50% of the upside of the market (from leverage of the option) with no downside (in nominal terms). Low fixed income yields thus make it less attractive, not more attractive to hedge with options.
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Elysium
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Re: Bonds protect against stock market downtimes

Post by Elysium »

Another good day for bonds, with stocks down, and tech stocks getting a rout.

S&P 500 -0.88%, LTT +1.08%, Total Bond 0.39%

Long Treasury is actually up 9.78% in the last six months, while S&P 500 is up 9.51%, nearly identical. Last one month, 3.25% vs -0.45%.
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Re: Bonds protect against stock market downtimes

Post by seajay »

Stocks issue (short) bonds, of the order $30T stock cap, $9T corporate bond cap (77/23). Is it more appropriate to buy $39 of the stock and have both stock and short bond exposure, or invest $30 in a stock and buy $9 of the bonds it issues?
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peskypesky
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Re: Bonds protect against stock market downtimes

Post by peskypesky »

BionicBillWalsh wrote: Sat Nov 27, 2021 8:36 am The argument for bonds is not compelling to me.

I continue to have about 20% of my portfolio in them but most days feel it’s 20% too much.
Yeah, I used to have 15-20% of my portfolio in bonds, but got rid of them. I needed asset growth. I got it.

But now....how to protect it??
GaryA505
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Re: Bonds protect against stock market downtimes

Post by GaryA505 »

peskypesky wrote: Fri Dec 03, 2021 4:34 pm
BionicBillWalsh wrote: Sat Nov 27, 2021 8:36 am The argument for bonds is not compelling to me.

I continue to have about 20% of my portfolio in them but most days feel it’s 20% too much.
Yeah, I used to have 15-20% of my portfolio in bonds, but got rid of them. I needed asset growth. I got it.

But now....how to protect it??
Ha ha, you guessed it. Bonds!
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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peskypesky
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Re: Bonds protect against stock market downtimes

Post by peskypesky »

GaryA505 wrote: Fri Dec 03, 2021 4:36 pm
peskypesky wrote: Fri Dec 03, 2021 4:34 pm
BionicBillWalsh wrote: Sat Nov 27, 2021 8:36 am The argument for bonds is not compelling to me.

I continue to have about 20% of my portfolio in them but most days feel it’s 20% too much.
Yeah, I used to have 15-20% of my portfolio in bonds, but got rid of them. I needed asset growth. I got it.

But now....how to protect it??
Ha ha, you guessed it. Bonds!
nooooooooooooooooooooooooooooooo
000
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Re: Bonds protect against stock market downtimes

Post by 000 »

Elysium wrote: Fri Dec 03, 2021 3:34 pm Another good day for bonds, with stocks down, and tech stocks getting a rout.

S&P 500 -0.88%, LTT +1.08%, Total Bond 0.39%

Long Treasury is actually up 9.78% in the last six months, while S&P 500 is up 9.51%, nearly identical. Last one month, 3.25% vs -0.45%.
SGOL +0.88%, RING +1.22%

Yet there were some days that didn't happen, just like some days bonds didn't move opposite to stocks.

Almost like..... these are all different risk classes with their own market structures......
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