3 ms·
> Why in the world would you own bonds? Because when every corp/muni bond folds - government issued bonds do not(and never have). Also, because they skyrocket
by clipradiowallet 6y ago
> Why in the world would you own bonds?
Because when every corp/muni bond folds - government issued bonds do not(and never have). Also, because they skyrocket in value during government-to-government conflict. Military action? 150% bond prices. It's a low risk instrument that turns into a winning lottery ticket for events such as.. North Korea launching a ballistic missile ~2 years ago, Donald Trump being accused of Russian collusion 3 years ago, and every military conflict ever.
Note, I'm not saying "govt bonds are great! buy them!"...I'm saying there are very old and valid reasons to own bonds of the government-backed variety.
- popcat 6y agoI think you have a fundamental misunderstanding of how bonds work. What you are saying is mostly true, BUT the coupon rate is set at bond issuance. Meaning if you own a bond now, and coupon rates go up because of an event, your rate does not magically adjust. When event like you describe happens, it means it's a good time to enter the bond market. What Dalio is saying is that currently real returns on bond are rock bottom or even negative. So why would you own them? He's not saying to NEVER own bonds, just that it currently does not make sense. If in the future, bond coupon rates increase, then it will once again make sense to own bonds.