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What i find particularly scary is the run on the banks scenario the author outlines. this really smashes the idea that bonds are the safe thing to get your mon

What i find particularly scary is the run on the banks scenario the author outlines. this really smashes the idea that bonds are the safe thing to get your money back. I know a lot of bonds have been selling, that's why the fed needs to buy so much every month, to make up for all that selling people are doing. Personally, i'm surprised even more people haven't been selling bonds. With the threat of inflation looming so large, and the enormous money supply that has increased in the last year. All those country's debt problems for which the only solution is inflation: it's the only thing that's politically feasible. I'm a totally risk averse investor and as such, I avoid cash and bonds like the plague with the exception of a modest emergency cash reserves. Of course this is all linked to the rise of all the other assets classes. when the 100 trillion dollar bond markets sell off, all that money has to go somewhere: equities, real estate, gold and now bitcoin.

ISL 6y ago
Bonds are a safe way to get your money back. It just might not buy as many cheeseburgers as you expected.
- mc10 6y ago
  This is not a guarantee at all; if inflation is sufficiently high then you could be actively losing money holding a bond that fewer and fewer people want.
  - 01100011 6y ago
    True but losing 5% on a bond investment might be better than losing 10% in a savings account or 50% in the market. You have to think about your timelines and risk tolerance.
  - ISL 6y ago
    A $1000 T-Bill will yield $1000 at maturity, every time.
    - pascalxus 6y ago
      that may be so but most people can't have a 30 year commitment so they buy ETFs. And ETFs need a buyer for that bond to have value. if those buyers don't exist then the bond could be worth a lot less than 1000$. this is what the author was talking about with the comparison to run on the banks for bonds.
      - ISL 6y ago
        Individuals can transact directly with the federal government on shorter-duration T-Bills (4-52 weeks) through Treasury Direct.
ycombinete 6y ago
where do risk averse investors go these days? On the market I'm invested in to total market index, as well as a global government bond index.
- sooheon 6y ago
  If by total market you mean the total world market (i.e. MSCI ACWI), that's about as risk averse as you can be while still being in equities. Total US market alone is a higher risk choice: https://www.aqr.com/Insights/Perspectives/The-Long-Run-Is-Lying-to-You https://www.aqr.com/Insights/Perspectives/The-Long-Run-Is-Ly...
  - ycombinete 6y ago
    Yes I’m in VWRA, and IGLA
- pascalxus 6y ago
  i mostly invest in inflation protected assets. there's really only 4 categories of investments: equities (stocks), fixed income (bonds), real estate and commodities. And, one of those categories (bonds) has been eliminated by the governments and feds of the world. So, that only leaves: equities, real estate and commodities (gold and bitcoin).
gjs278 6y ago
uh risk averse is the bonds. they even have I-bonds. it’s ridiculous to think stocks are just going to keep going up 8% every year. it’s one black swan event away from a potential 10 - 20 year recovery of your initial investment.
JMTQp8lwXL 6y ago
The signs of inflation have already presented. There are regular anecdotal reports in urban housing markets nationwide for homes selling for tens or hundreds of thousands of dollars over appraisal (which is meaningfully different enough from 'over list', as some agents in extremely hot markets intentionally underlist to attract bidding wars). Some of this is due to interest rates, but those have already bottomed out. At this point, it's a near certainty Covid will continue impacting markets for quarters to come. As mentioned, a little inflation is a good thing. If we think of the financial system like a rube goldberg machine or some heavy enterprise SaaS application --things you can't just tear down and start over-- the most viably peaceful way out of our problems is inflating the debt.
- zamfi 6y ago
  > homes selling for tens or hundreds of thousands of dollars over appraisal Except appraisal is an estimate of what a house will sell for, not any intrinsic notion of value. Selling over appraisal implies that the appraisers expect the value of the house to drop in nominal terms, not inflate.
  - DennisP 6y ago
    That makes sense, but when I took the real estate appraiser courses a couple decades ago, none of it was about market expectations. It was entirely about recent sale prices of comparable properties. Maybe experienced appraisers do more than that, but my state at least doesn't expect them to.
    - zamfi 6y ago
      Could also be that appraisers are being conservative (their "customers" are the banks, after all, not the buyers) in their estimates and haven't caught up with the higher bidding? But isn't "recent sale prices of comparable properties" about market expectations though? Like isn't the implication of an appraisal that if you were forced to sell the house you could get the appraised amount for it?

ISL 6y ago

Bonds are a safe way to get your money back. It just might not buy as many cheeseburgers as you expected.

mc10 6y ago
This is not a guarantee at all; if inflation is sufficiently high then you could be actively losing money holding a bond that fewer and fewer people want.
- 01100011 6y ago
  True but losing 5% on a bond investment might be better than losing 10% in a savings account or 50% in the market. You have to think about your timelines and risk tolerance.
- ISL 6y ago
  A $1000 T-Bill will yield $1000 at maturity, every time.
  - pascalxus 6y ago
    that may be so but most people can't have a 30 year commitment so they buy ETFs. And ETFs need a buyer for that bond to have value. if those buyers don't exist then the bond could be worth a lot less than 1000$. this is what the author was talking about with the comparison to run on the banks for bonds.
    - ISL 6y ago
      Individuals can transact directly with the federal government on shorter-duration T-Bills (4-52 weeks) through Treasury Direct.

ycombinete 6y ago

where do risk averse investors go these days? On the market I'm invested in to total market index, as well as a global government bond index.

sooheon 6y ago
If by total market you mean the total world market (i.e. MSCI ACWI), that's about as risk averse as you can be while still being in equities. Total US market alone is a higher risk choice: https://www.aqr.com/Insights/Perspectives/The-Long-Run-Is-Lying-to-You https://www.aqr.com/Insights/Perspectives/The-Long-Run-Is-Ly...
- ycombinete 6y ago
  Yes I’m in VWRA, and IGLA
pascalxus 6y ago
i mostly invest in inflation protected assets. there's really only 4 categories of investments: equities (stocks), fixed income (bonds), real estate and commodities. And, one of those categories (bonds) has been eliminated by the governments and feds of the world. So, that only leaves: equities, real estate and commodities (gold and bitcoin).

gjs278 6y ago

uh risk averse is the bonds. they even have I-bonds. it’s ridiculous to think stocks are just going to keep going up 8% every year. it’s one black swan event away from a potential 10 - 20 year recovery of your initial investment.

JMTQp8lwXL 6y ago

The signs of inflation have already presented. There are regular anecdotal reports in urban housing markets nationwide for homes selling for tens or hundreds of thousands of dollars over appraisal (which is meaningfully different enough from 'over list', as some agents in extremely hot markets intentionally underlist to attract bidding wars). Some of this is due to interest rates, but those have already bottomed out. At this point, it's a near certainty Covid will continue impacting markets for quarters to come. As mentioned, a little inflation is a good thing. If we think of the financial system like a rube goldberg machine or some heavy enterprise SaaS application --things you can't just tear down and start over-- the most viably peaceful way out of our problems is inflating the debt.

zamfi 6y ago
> homes selling for tens or hundreds of thousands of dollars over appraisal Except appraisal is an estimate of what a house will sell for, not any intrinsic notion of value. Selling over appraisal implies that the appraisers expect the value of the house to drop in nominal terms, not inflate.
- DennisP 6y ago
  That makes sense, but when I took the real estate appraiser courses a couple decades ago, none of it was about market expectations. It was entirely about recent sale prices of comparable properties. Maybe experienced appraisers do more than that, but my state at least doesn't expect them to.
  - zamfi 6y ago
    Could also be that appraisers are being conservative (their "customers" are the banks, after all, not the buyers) in their estimates and haven't caught up with the higher bidding? But isn't "recent sale prices of comparable properties" about market expectations though? Like isn't the implication of an appraisal that if you were forced to sell the house you could get the appraised amount for it?