Thinking about the unthinkable - Treasuries as a risky asset

[Kevin K.]

Two bond-related posts (amidst the blizzard):

This one from Bloomberg gives the lay of the land for Treasuries:

https://www.bloomberg.com/news/articles ... ckout=true

And this one about Ray Dalio's warnings offers a big picture perspective:

https://www.cnbc.com/2025/04/13/billion ... ssion.html

Obviously Treasuries are at the heart of the PP and every other risk-parity allocation out there. I've been thinking about alternatives but it's hard to imagine that most other assets wouldn't be crushed in the event of a default.

Gold of course continues to make sense but I have to confess that for the first time in memory plain vanilla all-in-one funds like Vanguard LifeStrategy Moderate growth that hold 40% in international equities and 40% in international bonds are looking quite appealing.

Thoughts?

[Kevin K.]

Since I posted the link to the CNBC piece on Dalio, I feel obligated to also share this great post by Ben Carlson on Dalio's track record with market predictions:

https://awealthofcommonsense.com/2025/0 ... al-crisis/

[ochotona]

I almost don't think I should post my reply here... it really belongs in Variable Portfolio.

OK, look for it there. It's not HBPP.

[ryanarin]

About half of my long bonds are now AAA and AA+ corporates. (As a reminder: that is what Harry recommended in place of Treasurys when you don't think your government is on the moral up-and-up). They are cheap right now too.

[ochotona]

The problem is... if the government bonds get crushed due to a confidence crisis, then all bonds (and stocks) will be re-priced. Holding AA AAA corporates OK if your corporate issuers keep paying and you hold to maturity and ignore the mark-to-market noise.

[Jack Jones]

About half of my long bonds are now AAA and AA+ corporates. (As a reminder: that is what Harry recommended in place of Treasurys when you don't think your government is on the moral up-and-up). They are cheap right now too.

Ben Graham also thought these high quality corporate bonds were suitable for an investor's portfolio.

[boglerdude]

They're probly fine. But I want to get paid to take on volatility, until I must have stability.

Trying to sort out if holding PFIX and EDV together makes sense, since they cancel out. Thinking it does, PFIX has more upside and rising real rates will take down all other assets. They'll take down the government too tho

[ochotona]

Hey have you seen the credit default swap data for US Treasuries?

https://www.worldgovernmentbonds.com/cd ... s/5-years/

It has increased from about 30 at New Year's Day to about 52 now... not quite a double, but it really took off after 4/9/2025.

Talking about central banks losing their Independence and all - Mr. and Ms. Market don't like that.

There was a CDS spike back in 2023 when the US flirted with the idea of defaulting on its obligations. The GFC era was very bad from a CDS point of view.

The stock market is a weakling compared to the bond market. The bond market is Guido... not the UHC shooter, but Guido the loan shark... if you don't make your payments, you will get disappeared faster than a wilted lettuce.

[dualstow]

Wasn’t the shooter Luigi?

[ochotona]

Wasn’t the shooter Luigi?

I was thinking more of this Luigi. I spent some years in Providence.

https://en.wikipedia.org/wiki/Luigi_Manocchio

[dualstow]

Wasn’t the shooter Luigi?

I was thinking more of this Luigi. I spent some years in Providence.

https://en.wikipedia.org/wiki/Luigi_Manocchio

I have a relative who spent time in prison with someone connected to Whitey Bulger. It’s so weird. My family is so straight laced.

[yankees60]

Wasn’t the shooter Luigi?

I was thinking more of this Luigi. I spent some years in Providence.

https://en.wikipedia.org/wiki/Luigi_Manocchio

This is all news to me.

I grew up in Rhode Island and lived there from 1951 to 1973. Never heard of him until now.

It says: "He was the boss of the New England-based Patriarca crime family,"

I had always thought it was Patriarca who was the New England boss and who lived in Federal Hill section of Providence.

Which is where my mother grew up and where several of my aunts and uncles and cousins lived.

"In November of 1967 he was shot in the neck and seriously wounded during a running gun battle on Federal Hill in Providence."

I'd also never heard of that.

[dualstow]

Treasurys aren’t as risky as being in the mafia.