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I am not a fan of bonds. Sure they could go higher for a few more years, but they can also go to "0" if something bad happens. literally 0. We are broke as broke, and our debt to me isn't seen as very safe.
I would literally hold cash over bonds. but that is just me.
A company could go higher for a few more years, but it can also go to "0" if something bad happens.
A human being grows for a couple years, say 70, or 80 if he has the strength, then he goes to "0" when the eventual "bad" happens.
I do not view the US as broke, it still has significant energy, agricultural and manufacturing production, and the means to deliver the goods to millions of people.
Debt is the money supply that "oils" the system, the blood supply that brings nutrients to the cells.
The problem is that a significant chunk of that money supply represents inefficiency in the use of resources, like a bunch of fatty tissue, yes, weighing on us all. Risky, yes; broke, no, and still fixable.
In the meantime, a bond is a legal obligation by the issuer, in return for cash today, to pay periodic interest and repay principal after a certain period of time. For the bondholder, they can be useful for asset/liability management over time. There are many types of bond issuers, not just the US Treasury, and the total US bond market alone is some multiple the size of the equity market (I forget right now the exact amount of times).
Corporations can default, but the US Treasury cannot default, unless there is some political decision or event to end the country as we know it (see the eurozone sovereign debt crisis to put this into perspective).
Life is movement and risk.
In the meantime, if one decides to trade bonds, he does so at his own risk, like everything else in life.
Yes, last Wednesday and Thursday, and on Monday of this week, cash was king. But yesterday some bond funds bounced back further than the equity indices.
If the OP does not need to sell now for some major expense, but instead has the bonds to live off the interest payments, and hopefully can also reinvest a portion of those payments, then welcome this much needed correction in the bond market and trust the managers - assuming that you picked good ones with long experience - to use this opportunity to reposition the portfolio accordingly, to take advantage of rising rates, reinvesting the coupon and repayments, and/or then gaining back some of the market price once this volatility peters out and the economy continues it slow slog over the next decade or two.
In the meantime, if you want growth, and/or other sources of income, by all means equities too, but the issuers, boards of directors and managers have obligations that are different than those of the issuers of bonds. Ideally, then, both, as well as real estate, etc., etc., etc.
OK I don't want to be "slaughtered." I have been working since I was 16, have been reading "Money" magazine since I was 22, (it just confuses me) the info/advice is all over the place, and all I have ever dreamed of is retiring, at a semi-young age and not retiring into poverty. Being "slaughtered" was never the goal. Thank you for your input. I hate the National debt too. So insane.
OK, so how about a new way of looking at investing? If you spend $2,000 per year on gasoline, and buy a percentage ownership interest in big oil companies for $20,000, your share of oil company earnings will match your expense for gasoline. So at that point, have you really "invested in stocks" or did you merely prepay all your future gasoline expense? If gas prices go up over the long term (hah hah, I said 'if') then your oil company earnings will go up too. If for every $1,000 you spend each year on clothes and household goods and groceries, you owned $14,000 worth of Walmart stock, same thing.
You may have heard that it is financially better to own than to rent. If you own no stocks, you are renting the utility company, the stores you visit, the refineries and distribution systems that bring you gasoline, the communication companies you use, etc.etc.etc. Meanwhile, I own them--thanks for doing business with me!
This mindset may help you get out of the syndrome of "playing" the stock market, and into the mindset of "owning" companies. Versus ownership of bonds at rates near the lousiest of our lifetimes, and holding cash at the lousiest rates of our lifetimes, and living with the after-effects of participating in the biggest market stampede of our lifetime (the stampede into "safety" and "stability" of fixed income may turn out to be neither safe nore stable)...this is diversification you might need.
No guarantees, of course, and I'm not you so I'm not recommending any course of action, other than to look at things a little differently.
Bonds are for morons. Cash is trash. Put 10% of your assets in equities immediately and 10% more every month until you are 60% in stocks. If volatility in account values makes you cry like a little girl then shred your statements unopened until the Dow hits 18000.
I like your style, marco.
Happy ... if you won't need the dough for ten years or longer, you are absolutely CrAzY to stay away from equities...
OK, so how about a new way of looking at investing? If you spend $2,000 per year on gasoline, and buy a percentage ownership interest in big oil companies for $20,000, your share of oil company earnings will match your expense for gasoline. So at that point, have you really "invested in stocks" or did you merely prepay all your future gasoline expense? If gas prices go up over the long term (hah hah, I said 'if') then your oil company earnings will go up too. If for every $1,000 you spend each year on clothes and household goods and groceries, you owned $14,000 worth of Walmart stock, same thing.
That's exactly how I use stocks, agreed.
But bonds also can also meet current and future liability needs that stocks can't - and so can real estate -, with more or less risk depending on a number of factors. That's why the economy has both (and then some).
You seem to have a very limited (moronic) knowledge of the bond market, but that's okay you've prospered just the same.
A company could go higher for a few more years, but it can also go to "0" if something bad happens.
A human being grows for a couple years, say 70, or 80 if he has the strength, then he goes to "0" when the eventual "bad" happens.
I do not view the US as broke, it still has significant energy, agricultural and manufacturing production, and the means to deliver the goods to millions of people.
Debt is the money supply that "oils" the system, the blood supply that brings nutrients to the cells.
The problem is that a significant chunk of that money supply represents inefficiency in the use of resources, like a bunch of fatty tissue, yes, weighing on us all. Risky, yes; broke, no, and still fixable.
In the meantime, a bond is a legal obligation by the issuer, in return for cash today, to pay periodic interest and repay principal after a certain period of time. For the bondholder, they can be useful for asset/liability management over time. There are many types of bond issuers, not just the US Treasury, and the total US bond market alone is some multiple the size of the equity market (I forget right now the exact amount of times).
Corporations can default, but the US Treasury cannot default, unless there is some political decision or event to end the country as we know it (see the eurozone sovereign debt crisis to put this into perspective).
Life is movement and risk.
In the meantime, if one decides to trade bonds, he does so at his own risk, like everything else in life.
Yes, last Wednesday and Thursday, and on Monday of this week, cash was king. But yesterday some bond funds bounced back further than the equity indices.
If the OP does not need to sell now for some major expense, but instead has the bonds to live off the interest payments, and hopefully can also reinvest a portion of those payments, then welcome this much needed correction in the bond market and trust the managers - assuming that you picked good ones with long experience - to use this opportunity to reposition the portfolio accordingly, to take advantage of rising rates, reinvesting the coupon and repayments, and/or then gaining back some of the market price once this volatility peters out and the economy continues it slow slog over the next decade or two.
In the meantime, if you want growth, and/or other sources of income, by all means equities too, but the issuers, boards of directors and managers have obligations that are different than those of the issuers of bonds. Ideally, then, both, as well as real estate, etc., etc., etc.
Diversification, till death do you part.
Good Luck!
Good response and I agree with you. Nothing comes with risk.
I look at the secular bull/bear markets and invest accordingly.
I look at things like rising debt of government and some government are going down. Greece, japan, USA, etc will default. I don't know when, but they will in my lifetime. It is mathematically impossible to keep going at the rate they are, and even if they do cut back they are screwed.
If government are looking for money (increased taxes and money printing), and I look at my age. I look at what is historically cheap (commodities are in relation to everything else). I would like to invest in something where I have little risk.
So I step back and take a big picture look at things. Typically when governments are completely screwed, they start money printing and buying their own debt. They will then force the citizens to invest in the governments bonds. They might even take money outright from you out of a bank (cypress). We are seeing all the things right in front of everyones eyes that governments do when they are failing.
You look at peak oil, soil degradation, declining ore grades and the exponential increase of energy to mine minerals from the earth. Even if these companies make more and more money, I am willing to bet government will tax them more and more, then you have the risk of Nationalization. You also have the green folks wanting to NIMBY their ass.
From my standpoint, holding physical gold and silver is the best bet because nationalization is not a risk, a company who runs into limited energy in the future is not a risk, government won't tax the corporation you are invested in, etc. The government doesn't know you own physical metals, they can't tax it, etc.
Silver is something like 95% lower in terms of availablity and inventory than 1950 yet it is one of the cheapest commodities on earth for being this low. You can buy it in physical form cheaper than it is mined right now. Governments don't know you own it, they can't tax it, and when sold for cash don't know about it. They absolutely HATE it and will most likely manipultae it down if they can to maintain their power over human slaves paying back a fictious debt that doesn't really exist (money from blank check book). The interests of bankers and government is to maintain the paper fiat system as long as they possibly can. They also lease gold into the market, so it is even questionable if they have the gold they say they do. They lease to surpress the price. They set up ETF's to absorb demand to not sell physical. They leveraged the futures markets far higher than physical metal that exists. I could definitely see the manipulation going on regardless of outright manipulation.
In history we have never had such a paper to real asset imbalance in the history of the world. This time is not different, and all it is going to take is a one or a few currencies to fail of some large countries (like Japan) and the whole game could be done. Even the dollar, we just need people to get scared and poof. fiat paper is done.
I consider physical metals to be the least risky of any asset out there. I know people will look at the current market action and think I am a kook. It doesn't really bother me because I know history and the fundamentals.
Name some companies that are over 200 yrs old? Name a currency over a few hundreds years old? Gold and silver 6,500 years and hasn't lost its value over the long run.
Some people will look back on these coming months and say....god damn I could have purchased silver in the teens. I was such a moron.
well i would have been a happy little moron for over 35 years as bonds beat equities over almost every time frame so i certainly would not say bonds are for morons.
the last 13 years bonds have made more money for investors than anything else. capital gains were amazing.
no one can predict what is a head but for the next few years they still may end up being the investment of choice if things do not improve out there..
completely agree. I have been a bond investor for almost 40 years and over time I have done EXTREMELY well. I guess the real moron is the one with little experience and history
completely agree. I have been a bond investor for almost 40 years and over time I have done EXTREMELY well. I guess the real moron is the one with little experience and history
I agree that bonds are a great investment during certain periods of time, I just think their time is going to end rather soon.
My heart goes out to those who follow the advice of many financial people who recommend the whole X% stocks Y% bonds.
I have a feeling that bonds, and I admit, I don't know when, will lose 90%+ of their value, similar to the 1970's. most people grew up with bonds going up their whole life and think that is normal.
But bonds also can also meet current and future liability needs that stocks can't - and so can real estate -, with more or less risk depending on a number of factors. That's why the economy has both (and then some).
You seem to have a very limited (moronic) knowledge of the bond market, but that's okay you've prospered just the same.
All the best!
Ok, so "moron" was a little harsh.
I have made a fortune in bonds...junk bonds...bought for 20 cents and 40 cents and 50 cents on the dollar and annual yields of 15-30%. But that game is over for a while.
I'll agree with you on this: one needs to KNOW where one's money will come from. So pairing a bond with a known need for cash is one thing. Taking permanent capital and investing it long-term for 2% or 3% is something completely different. The Apple 10 year bond sold a few weeks back for 100 cents on the dollar, yielding 2.4%, now trades with a 10% loss. That kind of thing is what prompted the "M" word from me.
I agree that bonds are a great investment during certain periods of time, I just think their time is going to end rather soon.
You are making a market timing prediction/opinion....you may be right or wrong but you are just guessing.
Quote:
Originally Posted by icicles
My heart goes out to those who follow the advice of many financial people who recommend the whole X% stocks Y% bonds.
I would rather take the advice of people like John Bogle and Warren Buffet over someone named "icicles"...lol
Quote:
Originally Posted by icicles
I have a feeling that bonds, and I admit, I don't know when, will lose 90%+ of their value, similar to the 1970's. most people grew up with bonds going up their whole life and think that is normal.
Having a "feeling" means nothing and has no basis just like a monkey throwing a dart at a dart board....
I use VBMFX as one of my bond funds. Obviously you are saying there was a 90% drop in the 1970's and you are lumping in all bond investments as you try to prove a point (which I think you are incorrect)
Can you backtest this fund and advise what the returns would've been for the 1970's...I'd like to hear you back up your statement.
OK, so how about a new way of looking at investing? If you spend $2,000 per year on gasoline, and buy a percentage ownership interest in big oil companies for $20,000, your share of oil company earnings will match your expense for gasoline. So at that point, have you really "invested in stocks" or did you merely prepay all your future gasoline expense? If gas prices go up over the long term (hah hah, I said 'if') then your oil company earnings will go up too. If for every $1,000 you spend each year on clothes and household goods and groceries, you owned $14,000 worth of Walmart stock, same thing.
You may have heard that it is financially better to own than to rent. If you own no stocks, you are renting the utility company, the stores you visit, the refineries and distribution systems that bring you gasoline, the communication companies you use, etc.etc.etc. Meanwhile, I own them--thanks for doing business with me!
This mindset may help you get out of the syndrome of "playing" the stock market, and into the mindset of "owning" companies. Versus ownership of bonds at rates near the lousiest of our lifetimes, and holding cash at the lousiest rates of our lifetimes, and living with the after-effects of participating in the biggest market stampede of our lifetime (the stampede into "safety" and "stability" of fixed income may turn out to be neither safe nore stable)...this is diversification you might need.
No guarantees, of course, and I'm not you so I'm not recommending any course of action, other than to look at things a little differently.
Thank you Marco Polo, this was very helpful!
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