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A Ray Dalio Take:pension funds, insurance companies, sovereign wealth funds, and savings accounts cannot meet their financial needs with these investments so holding bonds assures their failure to meet their obligations. At the same time, while there is some room for diversification benefit, because of limitations of how low interest rates can go, bond prices are close to their upper limits in price, which makes being short them a relatively low-risk bet.
bondetf.net/short-bond-etf.htmIf you ever wondered how to short bonds in an ETF then you will be glad to know that there are currently several short bond ETFs. "Short" here does not refer to the duration of the bond (short-term) but rather the fact that it is a bearish or inverse bond ETF or exchange traded fund.
The current inverse bond ETFs available are mostly short treasury ETFs but they include an inverse high yield bond etf and they are issued by either ProShares or Direxion. The short treasury ETFs go up in price whenever Treasury Bonds go down in price and vice versa.
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Just saw on CNBC that a year ago, stonk market went down 12% in a day...seems like everyone has forgotten that. Could be a "black swan" day tomorrow if Powell says the "wrong" thing(s)...then all of a sudden bonds could look real good, so to your point, shorting them no good.
Good Times, hold onto your wallet!
Still, given that viewpoint here, negative rates are unlikely here, but a double dip recession would make bonds shine again, which is not to say buy bond funds. But shorting them could backfire easily.
Do you manage for the exception or for the rule?
That is the question. IMHO... many people manage for the exception. If you do... you will love Bonds right now. You will justify why they will protect you from all sorts of threats. Threats called Black Swans and other perilous names. BUT... are interest rates going lower? Do you really think they are? If so.... load into Bonds.
I still have a lot in bond etfs, am not about to bail at a loss, until necessary
have a lot of money earning zero too
but these inflation headlines and smart articles and even threads are bunk-tending, I am thinking
and at the same time shorting bonds, nah, asking for bad outcome
That’s not criticism ... I’m trying to learn what I don’t know. I’m looking out for a family member and asking the same questions... re investments and this market and conditions we are in.
YTD S&P 500 is up 5.50%
I'm a few years away from retirement and am not comfortable with a 100% equity allocation.
Higher quality bond funds have low correlations to equities and add ballast to one's portfolio.
My bond allocation is lower than average (based on age) since current bond yields are depressed.
Where if anywhere will you put spare moneys? Where should I put moneys now which I will not need for a few years (not a decade, but not 3-4y either)?
50-50 VTIP (GTO, MINT) and VONV (VONE, CAPE)? BND and BIV are down. Something additional into ARK and QQQ? Maybe.
Shiller p/e is close to 36, higher than it has ever been since the Y2k peak-plunge. Each week it goes higher. I coulda written this post, and believe I did, any month of the last 8 or so. We are 2/3 out of market for the last 10mos. In some sense we have enough and are being prudent in retirement. Otoh my wife, not just me, would like to have, or have had, the several hundred thou we 'missed', if I had stayed the course and done nothing.
I think we all kind of know hussman is prolly right and these stonk markets are way overvalued and could easily come down by over half if not for the fed. We're just greedy and don't want to admit it to ourselves
We've seen these disruptive, innovation type of fund managers get their lessons during turn of century. I would argue this time is even loonier and way more risky
I spent a lot of time in the 90s in silicon valley. Real jobs, real men running real companies, not these poofs running bullspit companies that have way fewer employees and burn thru fairy tale cash
Nothing wrong with sitting on heavy tbills and cash. Waiting like a tiger ready to pounce I'd rather get dinged by inflation than get drawn down by over 80%, like Nasdaq twenty years ago
I still remember my friends faces a year ago when their portfolios got mowed down. Deer in headlights. Looked despondent. Remember CNBC and all the special report shows with the startling music, keep running the one shot with the empty store shelves, scaring the shett out of everyone
Good luck to you and all,
I try to remind myself skilled fund managers help manage upside/downside potential. A fund like COTZX attempts to gauge these two dynamics and adjusts its holdings according to maximizing the up and minimizing the down. VWINX, PRWCX do the same and continue to be long term buy and holds for me. I feel sectors like healthcare (VHT) and consumer staples (FSRPX) will rise more than fall. I judge these fund's performance over years, not days.
A bad year in the bond market is often a bad day in the equity market.
-treasuries are still a flight to safety.
-I believe highly skilled bond fund mangers can add both alpha and beta strategies and disciplines that I am not capable of.
If you have won the game...stop playing (sort of)
-As much as possible diversify your portfolio away from over valued assets. I sold Real Estate (the house I raise my kids in) this year. I downsized my footprint & my tax burden (both property and income tax). By lowering my "living expenses" without sacrificing my "quality of living" I can take less risk in my portfolio.
Something like that. Stop playing the game if you've won.
Who knows right?
All get +1 !!
Stay Safe , Derf
Since the way I do balanced funds was to go 2/3 DSEEX and 1/3 bond something or other, that would not have happened, but yes, general point taken, absolutely.
I was hardly alone in thinking that the March-April plunge, given the impending scale of the plague and the immense economic hit, was going to establish a new bumpy bottom for a looong time. I sold nothing.
When almost everything I owned reached breakeven in May, though, I went largely to cash.
So I have experienced 10 months of jawdropped watching ever since, like so many.
Roger about hindsight.
I am not complaining (well, some of the time), being immensely privileged and lucky (also hardworking and frugal and all that virtue stuff), like all of us investing for decades in such a lengthy bull market.
why-world-would-you-own-bonds-ray-dalio? Because many retires that have enough don't want to have the high volatility of stocks
There are ETFs that Short Bonds: No thanks, I want to find managers that do it for me, I hardly ever shorted anything.
I wonder if it's the one I own that's up a shade over 6% ytd, with negative duration.
If one's idea of shorting bonds is to eek out a little more return based on security selection (à la a 130/30 fund or a market neutral fund) rather than making interest rate bets, one might look into long/short credit funds.
M* created this category of funds in 2016. https://www.morningstar.com/articles/784363/long-short-credit-funds-have-potential-as-bond-diversifiers
However, there aren't many such funds. "The Long-Short Credit category has dwindled in size since its launch in 2016, and [Morningstar's] returning the remaining strategies to their prior home in the Nontraditional Bond cateory" in April 2021.
In that memo, M* refutes the quoted statement about long-short credit funds having a big difference from nontraditional bond funds. "[I]n practice, both groups of funds have tended to minimize interest-rate risk and emphasize credit exposures."
Makes one wonder if M* makes its decisions first and then comes up with rationalizations to justify them.
Just saw your question back to me... since I like to ask questions when I’m unsure or want other viewpoints. Based on your question... that implies 2-3 years time horizon. If you need those funds in 3 years... conservatively - I would go S&P 500 Index. Not bonds. Not any kind of bond fund. But yes I suppose a nice 500 index would fair better in the next 3 years vs. in cash earning no money.
@michaelsaylor would suggest Bitcoin. But I still view that as Vegas gambling (for now).
1) All the money is invested, no cash. Only in high risk market I'm out. In the last 10-11 years I was out under 2%. Before that I was in all the time.
2) Since the beginning in 1995 I hardly used alternative funds, definitely not for more than several weeks or a big %. I keep is simple, stocks, bond, and allocation funds.
3) Many average Joe retirees that have enough can do the following. They have some cash flow (from SS + distribution + pension + can sell something), in good times they can sell stocks and in bad times they can sell some bonds. Some of these bonds should be a ballast for stocks which means in market meltdown they will go up or have minimal losses.
4) Cash? I never believed in cash since the beginning even in retirement. You can have 3-6 months of living expenses and can sell something (per #3 above) 3-4 times annually. I never had an emergency I couldn't handle. I have used credit cards, then I have several thousands in cash and I can always sell my funds and get money in 2 days.
From: The Most Overused Analogies in Finance
See them all HERE.
I ask myself that question regularly.
But another way to look at it... how many times in history has the S&P 500 dropped 20-30 percent? The next question is... and when it has... how many times has it taken 3-5 years to recover? When I’ve examined that... I’ve found scarcity and not regularity. That gives me comfort.
"YOU CAN"T LOSE".