The Bond Dream Room

Discussion of the Bond portion of the Permanent Portfolio

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mathjak107
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Re: The Bond Dream Room

Post by mathjak107 » Wed May 06, 2020 6:29 am

pugchief wrote:
Tue May 05, 2020 7:50 pm
Ad Orientem wrote:
Tue May 05, 2020 7:47 pm
Wharton’s Jeremy Siegel declares end to the 40-year bull market in bonds

https://www.cnbc.com/2020/05/05/forty-y ... iegel.html
If Krugman had said it, you could back up truck buying LTT. Siegel is at least worth a large trunkful, tho.
siegel is likely right ... but right now we still have a whole lot of bad stuff in the economy and equities to deal with so the big question is when does it reverse ...who knows , maybe it did as rates have been creeping up the last month .
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Re: The Bond Dream Room

Post by sophie » Wed May 06, 2020 10:04 am

Ad Orientem wrote:
Tue May 05, 2020 7:47 pm
Wharton’s Jeremy Siegel declares end to the 40-year bull market in bonds

https://www.cnbc.com/2020/05/05/forty-y ... iegel.html
If I had a dime for every article published in the past 10 years saying exactly the same thing, I wouldn't have to buy any bonds.
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Ad Orientem
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Re: The Bond Dream Room

Post by Ad Orientem » Wed May 06, 2020 10:12 am

sophie wrote:
Wed May 06, 2020 10:04 am
Ad Orientem wrote:
Tue May 05, 2020 7:47 pm
Wharton’s Jeremy Siegel declares end to the 40-year bull market in bonds

https://www.cnbc.com/2020/05/05/forty-y ... iegel.html
If I had a dime for every article published in the past 10 years saying exactly the same thing, I wouldn't have to buy any bonds.

LOL. I can remember similar predictions back in the 90s when yields fell all the way to 7%. In this case though, my gut says he is right. The bond market seems to have become divorced from economic reality. The world is drowning in debt and we are likely facing a wave of defaults and bankruptcies. The only thing preventing a bond market rout is the Fed and its printing press. How long can that can continue? For now it seems ok and maybe even necessary. But eventually they will have to slow the flow of free money or risk sparking inflation. Looking at this from a long term perspective I think bonds have become exactly what they are not supposed to be... high risk and very low return.
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Re: The Bond Dream Room

Post by bedraggled » Wed May 06, 2020 11:26 am

Could somebody or many of you comment on the bond structure collapsing. All those unpaid bonds and interest payments missed might manifest as deflation. Kinda reminds me of 1929-1932.

Interest rates did spike in 1930 as bankers only wanted to lend to the best borrowers; the bankers then found out there were no borrowers, so rates plummeted.

Bonds may be a great place to wallow.

Thanks.
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Re: The Bond Dream Room

Post by pmward » Wed May 06, 2020 11:36 am

bedraggled wrote:
Wed May 06, 2020 11:26 am
Could somebody or many of you comment on the bond structure collapsing. All those unpaid bonds and interest payments missed might manifest as deflation. Kinda reminds me of 1929-1932.

Interest rates did spike in 1930 as bankers only wanted to lend to the best borrowers; the bankers then found out there were no borrowers, so rates plummeted.

Bonds may be a great place to wallow.

Thanks.
Yes this is exactly how it works. Treasuries perform great in this scenario. Corporates, mortgage backed, junk bonds, ext will implode though. All the money coming out of those riskier bonds will wind up in treasuries, so there would be a massive bid.
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Re: The Bond Dream Room

Post by bedraggled » Wed May 06, 2020 11:47 am

Maybe this current interest rate increase leads to a significant increase in the prices of LTTs. This could be the first swoon in one of Harry's 4 categories for me... but maybe not. This ain't dull.
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Re: The Bond Dream Room

Post by Tortoise » Wed May 06, 2020 12:27 pm

Remember, the Fed recently announced that it would start buying corporate bonds if needed. So there's that.
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Re: The Bond Dream Room

Post by pmward » Wed May 06, 2020 12:53 pm

Tortoise wrote:
Wed May 06, 2020 12:27 pm
Remember, the Fed recently announced that it would start buying corporate bonds if needed. So there's that.
That doesn't necessarily stop what I've stated. If they buy those corporate bonds, they are buying them from institutions, and those institutions are likely to take the cash and funnel it into treasuries. It may place a floor on losses in the corporate/junk/mortgage backed bond markets, but it still juices the treasury market.
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Re: The Bond Dream Room

Post by mukramesh » Wed May 06, 2020 3:34 pm

Aren't low rates just the result of asset price inflation -> the same that has been seen in stocks, gold, real estate, etc.? Why should the bond bull market be over but bull markets?
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Re: The Bond Dream Room

Post by pmward » Wed May 06, 2020 3:45 pm

mukramesh wrote:
Wed May 06, 2020 3:34 pm
Aren't low rates just the result of asset price inflation -> the same that has been seen in stocks, gold, real estate, etc.? Why should the bond bull market be over but bull markets?
There are multiple factors that go into the price of bonds, but that certainly is a big one.
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Re: The Bond Dream Room

Post by Kevin K. » Fri May 08, 2020 10:16 am

So given all of these well-made points (and on the heels of the Dalio article I posted which goes into granular detail about money printing and fiat currencies in general) might a prudent "tweak" for these times be to maintain the PP bond barbell but with 15-20% in LTT's? At ~1.6% there's still a chance for them to give spectacular returns if rates drop to 0 or lower but conversely you limit the devastation that'd happen if rates spike by holding a lower percentage than the 25% the PP calls for.
Certainly seems like a better approach than going all ITT's.
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Re: The Bond Dream Room

Post by Vil » Sun May 10, 2020 8:19 am

pmward wrote:
Wed May 06, 2020 3:45 pm
There are multiple factors that go into the price of bonds
As I haven't received the notification email from Fed (they promised me, but anyway... :D ) and as certainly you have more information than me - what's going on with their plans to buy corporate bonds ? Is that only a word (even though widely spread) or any real actions taken ? Can see that HYG and HYLB has quite an increase of AUMs in the last week - 6.84% and 8.41% respectively.. how do you see things going with high yield bonds ?
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