I'm calling a bond bottom.

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Forester
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Re: I'm calling a bond bottom.

Post by Forester » Tue Sep 10, 2019 5:22 am

bluquark wrote:
Mon Sep 09, 2019 9:32 pm
Random Musings wrote:
Mon Sep 09, 2019 8:41 pm
I also can not find too compelling a reason to reach out on duration at this moment. Perhaps US rates will go negative and join other countries, but if that occurs, I would think that means there are economic problems afoot.
Uhh... that's the point of bonds, to do better than your stocks when there are economic problems afoot.
I read this a lot on Bogleheads about the alleged benefit of LT bonds, in reality much of the bonus could dissipate depending on when a portfolio is rebalanced. The large spread between stocks & bonds during the GFC came & went quickly.

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vineviz
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Re: I'm calling a bond bottom.

Post by vineviz » Tue Sep 10, 2019 5:38 am

Forester wrote:
Tue Sep 10, 2019 5:22 am
bluquark wrote:
Mon Sep 09, 2019 9:32 pm
Random Musings wrote:
Mon Sep 09, 2019 8:41 pm
I also can not find too compelling a reason to reach out on duration at this moment. Perhaps US rates will go negative and join other countries, but if that occurs, I would think that means there are economic problems afoot.
Uhh... that's the point of bonds, to do better than your stocks when there are economic problems afoot.
I read this a lot on Bogleheads about the alleged benefit of LT bonds, in reality much of the bonus could dissipate depending on when a portfolio is rebalanced. The large spread between stocks & bonds during the GFC came & went quickly.
The facts don’t support this stance, I’m afraid.

Over long enough periods, stocks should have greater returns than bonds on average. But the investor is interested in managing portfolio volatility through diversification, long term bonds are always more efficient and effective than shorter term bonds.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Forester
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Re: I'm calling a bond bottom.

Post by Forester » Tue Sep 10, 2019 7:43 am

vineviz wrote:
Tue Sep 10, 2019 5:38 am
Forester wrote:
Tue Sep 10, 2019 5:22 am
bluquark wrote:
Mon Sep 09, 2019 9:32 pm
Random Musings wrote:
Mon Sep 09, 2019 8:41 pm
I also can not find too compelling a reason to reach out on duration at this moment. Perhaps US rates will go negative and join other countries, but if that occurs, I would think that means there are economic problems afoot.
Uhh... that's the point of bonds, to do better than your stocks when there are economic problems afoot.
I read this a lot on Bogleheads about the alleged benefit of LT bonds, in reality much of the bonus could dissipate depending on when a portfolio is rebalanced. The large spread between stocks & bonds during the GFC came & went quickly.
The facts don’t support this stance, I’m afraid.

Over long enough periods, stocks should have greater returns than bonds on average. But the investor is interested in managing portfolio volatility through diversification, long term bonds are always more efficient and effective than shorter term bonds.
Yes you're right

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Random Musings
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Re: I'm calling a bond bottom.

Post by Random Musings » Tue Sep 10, 2019 10:30 pm

bluquark wrote:
Mon Sep 09, 2019 9:32 pm
Random Musings wrote:
Mon Sep 09, 2019 8:41 pm
I also can not find too compelling a reason to reach out on duration at this moment. Perhaps US rates will go negative and join other countries, but if that occurs, I would think that means there are economic problems afoot.
Uhh... that's the point of bonds, to do better than your stocks when there are economic problems afoot.
It was stated more as a concern at a larger level than just ones precious portfolio, However, bonds don't always save the day during an economic crisis.

Don't cry for me, Argentina.

Also, if you look at inflation adjusted returns late 60's to late 70's, US bonds did not really provide any help during that economically difficult period when there was higher inflation. Perhaps some benefit with rebalancing portfolio, but that wasn't quite the rage then. Of course, interest rates then peaked and both stocks and bonds have provided decent real returns as rates have dropped from 15+ percent down to around 2 percent. Bonds may do better when there are economic difficulties, but not always. Ask a really, really, old German.

No guarantees.

RM
I figure the odds be fifty-fifty I just might have something to say. FZ

bluquark
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Re: I'm calling a bond bottom.

Post by bluquark » Wed Sep 11, 2019 12:37 am

Pressure on rates to go lower signals a risk of deflation, not inflation. Long-term bonds certainly save the day during that sort of crisis. Ask a really old American.

Anyway, although negative rates are spooky, the real danger is if economic conditions call for them but central banks are unable or unwilling to bring them down that low. Then a deflationary spiral could get out of control.

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fredflinstone
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Re: I'm calling a bond bottom.

Post by fredflinstone » Tue Sep 17, 2019 1:56 pm

Alchemist wrote:
Sat Sep 07, 2019 2:02 am
Credit where credit is due, Fred called this about as accurately as anyone possibly could. :sharebeer

This was quite a contrarian call at the time. Most people and almost all "experts" were talking about how high rates were going to go with most predictions including 4-5% yields on the ten year treasury.

Now if someone can call a top, that would be equally impressive. So Fred, are we at the top yet?

Side topic: For those debating short vs intermediate vs long it really all depends on what role bonds are playing for you in your personal portfolio. Safety, alternate income source, some kind of volatility counter, even gross return, ect. There are many types of bonds because they can serve many purposes. There is no 'right' bond choice for everyone.
Thanks. I stated concerns about a possible bond market top on September 2nd, 2019:
viewtopic.php?f=1&t=289630

Of course, I don't know any better than anyone else what the bond market is going to do, but on the off chance that I'm right, I have been moving some assets from longish-term bonds to short-term bonds. And I agree with your side point. If someone has a 90/10 equity/bond split, it's fine to own long-term bonds and it's easy to pronounce "STAY THE COURSE." I, however, have something closer to a 40/60 split. Hence my anxiety about the possibility of a bond market top. Well to be honest, I am anxious about pretty much every asset class these days.

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