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It's worth noting that most people nowadays don't buy bonds directly, you would normally hold them through an ETF/index fund like BND or TLT. Yields typically d

It's worth noting that most people nowadays don't buy bonds directly, you would normally hold them through an ETF/index fund like BND or TLT. Yields typically drop when there's a flight to quality (i.e., people selling stocks to buy bonds). The upward pressure on bond prices drives yields down because people are willing to pay more for lower yields. Bonds are almost like a future of expected return on capital. If bond prices are high and yields are low, it suggests the market thinks equities will have a lower return. Bonds and stocks have been fairly non-correlated over recent years, but this hasn't always been so. It's great for modern portfolio theory (i.e., holding a portion of stocks and bonds and rebalancing periodically). There's no guarantee that it will stay this way. Anyway, I'm not giving investment advice, but I think the current market panic is short term and non-systemic, so it's not a terrible idea to consider rebalancing from bonds into stocks while the prices are good. If you think the market might keep dropping, then perhaps wait a little longer. The truth is that trying to time the market is like throwing a dart at a board blindfolded, so you might as well take advantage of the current state instead of speculating about the future.

justinzollars 7y ago
> Bonds and stocks have been fairly non-correlated over recent years, but this hasn't always been so. It's great for modern portfolio theory (i.e., holding a portion of stocks and bonds and rebalancing periodically). There's no guarantee that it will stay this way. This is true. This correlation has held for 30 years so we are conditioned into believing this is a sure trade - but it is not.
- ethbro 7y ago
  Ultimately, correlation in free markets is just frequency of similar participant behavior, no? So if everyone is using robo advisor allocation, and the allocation algorithms all feature a similar bond shift, then that becomes the correlation?
bluetwo 7y ago
But if you did want to buy bonds, any citizen can setup an account at: https://treasurydirect.gov https://treasurydirect.gov Also you can buy iBonds and TIPS, which are protected against inflation.
- H8crilA 7y ago
  Any good brokerage allows for trading bonds. Interactive Brokers does. The bond market is far larger than the stock market. If you wanna know "what's going on" better become familiar with at least the basics of it (interest rates, how they relate to bond prices, spreads for risky credit, floating rate vs fixed rate, inflation protected securities, carry trades). And it's not true that most bonds are held via ETFs (except by retail). There's a lot of trading going on at the institutional levels.
  - ethbro 7y ago
    Is it fair to say that one reason the bond market is so large is because of capacity and simplicity? The impression I get is that when you start talking in terms of $x0M+ US regular investment (e.g. on Monday, then again on Tuesday) stocks become a less viable option (due to liquidity and risk of orders moving the market). Bonds also seem more simplified and standardized, in that there are fewer weird / unmodelable features in a given bond issue.
    - H8crilA 7y ago
      Bonds are actually more complex. Try understanding covenants on bonds, it is not easy. There are hedge fund strategies that rely on better (than market) understanding of the legalese, triggering weird cases of technical defaults (i.e. defaults other than through a lack of timely payment) and whatnot.
      - ethbro 7y ago
        The way I was looking at it... technically by owning a stock you're exposed to the risk of the entire corporate legal structure (e.g. board, bylaws) as well as operational structure. Compared to a bond, even one with esoteric clauses, that seems more complicated.
forgot_my_pass 7y ago
> Bonds are almost like a future of expected return on capital. I would argue this is true for all investments that are judged by their ability to make money.
deleted 7y ago
[deleted]
nabla9 7y ago
I agree with all you said. I think US government is potentially the source for systemic risk that is realized within year or two. Regulation and oversight is cut dramatically, SEC has been castrated, white-collar crime investigations are cut in DOJ. In addition the administration does everything it can to keep markets going up until the elections. The change that large scale financial frauds and systemic risks can grow without being checked.
- kenneth 7y ago
  The systemic risk is the global pandemic of proportions not seen since the Spanish flu or the black death. It's not about whether the DOJ is going after hedge fund managers. Viruses don't care about income inequality.
  - nabla9 7y ago
    Pandemic is not systemic risk. Pandemic might trigger systemic risk. Pandemics, wars etc. are real world events that affect economy, not internal systemic instabilities in the financial markets.
MuffinFlavored 7y ago
> I'm not giving investment advice, but I think the current market panic is short term and non-systemic I agree. I just don't personally understand why FOMC is cutting rates.
deleted 7y ago
[deleted]
Der_Einzige 7y ago
Lmao the current market panic is not short term and is absolutely systemic. Supply chains have ground to a halt . Actually, it's easy to "time the market"... Just buy puts when everyone is panicking.
- thedance 7y ago
  That's the beauty of a real crash. It doesn't matter much when you go short.
- vikramkr 7y ago
  I'd hate to have had puts expiring on that day the markets rallied a couple days ago. Volatility goes both ways.
  - kenneth 7y ago
    Not only did that happen to me, but Robinhood's outage (1) prevented me from selling in the morning when I tried to, and (2) didn't trigger the auto-sell 1h before market close on un-exercisable options. Cost me $25k or so on top of the rally. Fuck Robinhood for this.
- jotakami 7y ago
  My retirement account is up 20% in two weeks from SPY puts and GLD calls
  - kenneth 7y ago
    SPY puts (and some others) have been good to me. I'm up about 1000% in my public positions over the past couple weeks. I'm letting it ride until my thesis on how bad this gets pays through. It's my hedge against my world getting significantly affected by the virus.
jotakami 7y ago
You’re not wrong, but government bonds actually have a somewhat different role in the modern financial system. Specifically, they are used as collateral in the interbank lending market, which means they have exchange value above and beyond the discounted cash flow of the bond itself. Which is basically how negative yielding bonds could even exist.
throw0101a 7y ago
> Bonds and stocks have been fairly non-correlated over recent years, but this hasn't always been so. An analysis of how the correlation has faired between the S&P500 and bonds since WW2: * https://awealthofcommonsense.com/2019/07/26793/ https://awealthofcommonsense.com/2019/07/26793/ There were quite a few years when it has been positive. One of the more useful attributes of bonds is that you could sell them when stocks tanked: when you rebalanced your portfolio to re-align things to the desired equities/fixed-income allocation, bonds were a form of 'keeping your powder dry' to buy low during stock market corrections.

justinzollars 7y ago

> Bonds and stocks have been fairly non-correlated over recent years, but this hasn't always been so. It's great for modern portfolio theory (i.e., holding a portion of stocks and bonds and rebalancing periodically). There's no guarantee that it will stay this way. This is true. This correlation has held for 30 years so we are conditioned into believing this is a sure trade - but it is not.

ethbro 7y ago
Ultimately, correlation in free markets is just frequency of similar participant behavior, no? So if everyone is using robo advisor allocation, and the allocation algorithms all feature a similar bond shift, then that becomes the correlation?

bluetwo 7y ago

But if you did want to buy bonds, any citizen can setup an account at: https://treasurydirect.gov https://treasurydirect.gov Also you can buy iBonds and TIPS, which are protected against inflation.

H8crilA 7y ago
Any good brokerage allows for trading bonds. Interactive Brokers does. The bond market is far larger than the stock market. If you wanna know "what's going on" better become familiar with at least the basics of it (interest rates, how they relate to bond prices, spreads for risky credit, floating rate vs fixed rate, inflation protected securities, carry trades). And it's not true that most bonds are held via ETFs (except by retail). There's a lot of trading going on at the institutional levels.
- ethbro 7y ago
  Is it fair to say that one reason the bond market is so large is because of capacity and simplicity? The impression I get is that when you start talking in terms of $x0M+ US regular investment (e.g. on Monday, then again on Tuesday) stocks become a less viable option (due to liquidity and risk of orders moving the market). Bonds also seem more simplified and standardized, in that there are fewer weird / unmodelable features in a given bond issue.
  - H8crilA 7y ago
    Bonds are actually more complex. Try understanding covenants on bonds, it is not easy. There are hedge fund strategies that rely on better (than market) understanding of the legalese, triggering weird cases of technical defaults (i.e. defaults other than through a lack of timely payment) and whatnot.
    - ethbro 7y ago
      The way I was looking at it... technically by owning a stock you're exposed to the risk of the entire corporate legal structure (e.g. board, bylaws) as well as operational structure. Compared to a bond, even one with esoteric clauses, that seems more complicated.

forgot_my_pass 7y ago

> Bonds are almost like a future of expected return on capital. I would argue this is true for all investments that are judged by their ability to make money.

deleted 7y ago

[deleted]

nabla9 7y ago

I agree with all you said. I think US government is potentially the source for systemic risk that is realized within year or two. Regulation and oversight is cut dramatically, SEC has been castrated, white-collar crime investigations are cut in DOJ. In addition the administration does everything it can to keep markets going up until the elections. The change that large scale financial frauds and systemic risks can grow without being checked.

kenneth 7y ago
The systemic risk is the global pandemic of proportions not seen since the Spanish flu or the black death. It's not about whether the DOJ is going after hedge fund managers. Viruses don't care about income inequality.
- nabla9 7y ago
  Pandemic is not systemic risk. Pandemic might trigger systemic risk. Pandemics, wars etc. are real world events that affect economy, not internal systemic instabilities in the financial markets.

MuffinFlavored 7y ago

> I'm not giving investment advice, but I think the current market panic is short term and non-systemic I agree. I just don't personally understand why FOMC is cutting rates.

deleted 7y ago

[deleted]

Der_Einzige 7y ago

Lmao the current market panic is not short term and is absolutely systemic. Supply chains have ground to a halt . Actually, it's easy to "time the market"... Just buy puts when everyone is panicking.

thedance 7y ago
That's the beauty of a real crash. It doesn't matter much when you go short.
vikramkr 7y ago
I'd hate to have had puts expiring on that day the markets rallied a couple days ago. Volatility goes both ways.
- kenneth 7y ago
  Not only did that happen to me, but Robinhood's outage (1) prevented me from selling in the morning when I tried to, and (2) didn't trigger the auto-sell 1h before market close on un-exercisable options. Cost me $25k or so on top of the rally. Fuck Robinhood for this.
jotakami 7y ago
My retirement account is up 20% in two weeks from SPY puts and GLD calls
- kenneth 7y ago
  SPY puts (and some others) have been good to me. I'm up about 1000% in my public positions over the past couple weeks. I'm letting it ride until my thesis on how bad this gets pays through. It's my hedge against my world getting significantly affected by the virus.

jotakami 7y ago

You’re not wrong, but government bonds actually have a somewhat different role in the modern financial system. Specifically, they are used as collateral in the interbank lending market, which means they have exchange value above and beyond the discounted cash flow of the bond itself. Which is basically how negative yielding bonds could even exist.

throw0101a 7y ago

> Bonds and stocks have been fairly non-correlated over recent years, but this hasn't always been so. An analysis of how the correlation has faired between the S&P500 and bonds since WW2: * https://awealthofcommonsense.com/2019/07/26793/ https://awealthofcommonsense.com/2019/07/26793/ There were quite a few years when it has been positive. One of the more useful attributes of bonds is that you could sell them when stocks tanked: when you rebalanced your portfolio to re-align things to the desired equities/fixed-income allocation, bonds were a form of 'keeping your powder dry' to buy low during stock market corrections.