Author Topic: Coronavirus Recession? Should i buy bonds now?  (Read 2075 times)

joe189man

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Coronavirus Recession? Should i buy bonds now?
« on: April 29, 2020, 09:00:17 AM »
Ray Dalio seems to think we are headed for a depression, he is a billionaire that started a hedge fund company so he may know whats going on (maybe?). Also this current rally seems ridiculous in light of all the businesses that are closed and all of the mortgages, residential and commercial, that aren't being paid. With that said, we never really know whats going to happen.

right now i have 100% of my 401k in an S&P 500 fund at Fidelity (BSPAX). i appreciate the recent rebound but wonder if i should put a large percentage (25-50% or more) into a bond fund (like BDMIX) to help preserve some capital in case of a recession/depression.

i know we shouldnt try to time the market, but people do it all the time, some guess right some don't

if you were me, would you switch to some bonds?

nereo

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Re: Coronavirus Recession? Should i buy bonds now?
« Reply #1 on: April 29, 2020, 09:06:26 AM »
With that said, we never really know whats going to happen.


i know we shouldnt try to time the market, but people do it all the time, some guess right some don't


Sounds like you've answered your own question.

More to the point, if this latest recession has you feeling uncomfortable about your investment strategy, that's a big sign that your risk tolerance is lower than you might have believed during the bull market.  That's not uncommon.  Most people think their risk tolerance is higher than it is when the markets keep going up.

If that's the case you may want to rethink your AA and invest accordingly.  But DON'T do it because of where the market is now, or where you think it iwll be in 12, 24 or 60 months from now.  Find what makes sense for you during both bull and bear markets and stick to that.  Sounds like you'd be more comfortable with some bonds or a larger E-fund.  That's cool.  But whatever you decide on should also work for the next market rally of unknown length.

Finally, don't go overboard.  There's a reason why 60/40 is a conservative starting point used by traditional money managers. You lose some growth but get a TON of safety during truly craptastic years (like 2020).  You might be 70/30 or 80/20....  only you can know.

vand

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Re: Coronavirus Recession? Should i buy bonds now?
« Reply #2 on: April 29, 2020, 09:11:36 AM »
Dalio likes gold, some stocks and high quality corporate bonds in this environment. He is not at all keen on Goverment bonds.

That doesn't mean he's going to be proven correct, but with Treasury yields on the floor it's easy to see why he think money could be better deployed elsewhere.

TBH I think you've missed the boat on the bond surge. Long term bond funds are up 20-30% in the last 18 months. All the future returns have been sucked forward by the current Fed action. Bonds have done their job in last month. No point in buying insurance after you've wrecked your truck.


bthewalls

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Re: Coronavirus Recession? Should i buy bonds now?
« Reply #3 on: May 10, 2020, 04:32:29 PM »
[quote author=vand link=topic=115959.msg2616178#msg2616178 date=1588173096TBH I think you've missed the boat on the bond surge. Long term bond funds are up 20-30% in the last 18 months. All the future returns have been sucked forward by the current Fed action. Bonds have done their job in last month. No point in buying insurance after you've wrecked your truck.
[/quote]

Vand do you not think the market will slump massively as covid hits big numbers?...I know it impossible to time but we could see a huge depression....

harvestbook

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Re: Coronavirus Recession? Should i buy bonds now?
« Reply #4 on: May 12, 2020, 05:40:22 PM »
When do you need your 401K? What's the point of making a panic move when you might not even need the money for 20 years?

ETF2

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Re: Coronavirus Recession? Should i buy bonds now?
« Reply #5 on: May 12, 2020, 07:05:12 PM »
When do you need your 401K? What's the point of making a panic move when you might not even need the money for 20 years?

This.  I'd personally stay the course.  The market goes up, relentlessly.  And will probably continue to do just that.  I'm pretty much loaded in VTSAX and BRK.  I've been buying heavily lately.  Even if it crashes, I'll buy more on the way down if I'm able.  It just seems like a bad gamble to me to think the market won't rebound back to 29k on the DOW, etc eventually.

ender

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Re: Coronavirus Recession? Should i buy bonds now?
« Reply #6 on: May 12, 2020, 07:09:11 PM »
Dalio is a borderline fraud.

I do not know why anyone listens to him at this point.

UnleashHell

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Re: Coronavirus Recession? Should i buy bonds now?
« Reply #7 on: May 13, 2020, 06:30:32 AM »
Dalio is a borderline fraud.

I do not know why anyone listens to him at this point.

Because it fits the narrative of what a few people on here want to hear from the experts.
The sky is falling. we are all going to die from the stock market crashing down on us.

there ya go. maybe I need to contact my Journo buddies and get my own headlines.

celerystalks

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Re: Coronavirus Recession? Should i buy bonds now?
« Reply #8 on: May 13, 2020, 07:31:47 AM »
Dalio is a borderline fraud.

I do not know why anyone listens to him at this point.

Would you care to elaborate?

Personally, I find Dalio refreshing in that I can sense that he thinks for himself, he admits when he was wrong, and owns the consequences of his decisions.
I also think the Bridgewater concept of an idea meritocracy, credibility (believability) weighted decision making, personality testing/internal “baseball cards”,  radical truth and radical transparency represent interesting management theories. I wish I could work in such an environment.

Oh. And he is rich. So either he is a genius or just got lucky... Or a little of both.

joe189man

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Re: Coronavirus Recession? Should i buy bonds now?
« Reply #9 on: May 13, 2020, 08:40:13 AM »
OP here, maybe i should have added the caveat that i would buy some bonds now and sell them around the 100-200 day moving average market low and buy the S&P 500 again

i have a 15-20 year time horizon before i need this money, so no problem leaving it alone

i get the dont try to time the market stuff, but just look at the optics, the markets are rallying for no reason, Coronavirus isnt over and wont be gone till a workable vaccine is created (12-18 months min. according to experts), we just had the longest bull market ever, 30 million americans are out of work, millions cant pay their mortgages or rent and the landlords might not be able to pay the mortgages on their rentals as well, no body is buying stuff, and people are saving and paying off debt, credit card balances dropped the most in history(as a percentage) in march (i think i read that)

we have 3 trillion in stimulus spending and a government with no direction or plan to reduce the current national debt that equals GDP

ok chicken little rant over, but why not think critically about an investment vs set it and forget it?


nereo

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Re: Coronavirus Recession? Should i buy bonds now?
« Reply #10 on: May 13, 2020, 08:50:30 AM »

i get the dont try to time the market stuff, but just look at the optics, the markets are rallying for no reason, Coronavirus isnt over and wont be gone till a workable vaccine is created (12-18 months min. according to experts), we just had the longest bull market ever, 30 million americans are out of work, millions cant pay their mortgages or rent and the landlords might not be able to pay the mortgages on their rentals as well, no body is buying stuff, and people are saving and paying off debt, credit card balances dropped the most in history(as a percentage) in march (i think i read that)

we have 3 trillion in stimulus spending and a government with no direction or plan to reduce the current national debt that equals GDP

ok chicken little rant over, but why not think critically about an investment vs set it and forget it?

I mean... what you are saying all makes logical sense, but you are asking for logic in the markets, and the market is not the economy.  That government stimulus spending you referenced is a core reason why stocks went up even as the economy went into the toilet.  Now there's talk of another 3T plan...

Will the debt-to-GDP matter?  We have another topic on this.  Maybe, maybe not.  Interestingly when you factor in the yield on that debt we're much lower than we were in the 80s and 90s.

Sure... most of us are in agreement that there could be some rough times ahead for the markets.  That's a core reason why the yield on bonds is so incredibly low... so much money piling into a safe haven.

By all accounts April should have been the worst month in a century absent all the stimulus-- 20MM unemployment claims, a monumental drop in trade, GDP and productivity.  Yet it wound up being one of the best months for stocks we've had.  Go figure.  Are we going to see a huge drop in May?  Or June?  Or this fall?  Or will we just go sideways for a couple of years? One thing that has happened is a number of companies have started to figure out WFH and limited production after some epic false-starts.

In short:  ::shrug::

celerystalks

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Re: Coronavirus Recession? Should i buy bonds now?
« Reply #11 on: May 13, 2020, 08:55:32 AM »
OP here, maybe i should have added the caveat that i would buy some bonds now and sell them around the 100-200 day moving average market low and buy the S&P 500 again

i have a 15-20 year time horizon before i need this money, so no problem leaving it alone


This speaks to just buying the S&P or VTSAX or whatever and just leaving it.

Quote
ok chicken little rant over, but why not think critically about an investment vs set it and forget it?

This is already what everyone on Wall St. is trying to do. If you adopt the current consensus view and invest accordingly, then it is likely to already be bought up and fully valued (e.g. bonds are very pricey right now).  Or if you take a contrarian view and buy in before everyone else realizes, it can be tough to hang on for the ride... And contrarians can be wrong and loose money, too.  Buy and hold takes the element of human emotion and incorrect analysis out of the equation and, for most people, will produce superior results.

vand

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Re: Coronavirus Recession? Should i buy bonds now?
« Reply #12 on: May 13, 2020, 09:07:38 AM »
OP here, maybe i should have added the caveat that i would buy some bonds now and sell them around the 100-200 day moving average market low and buy the S&P 500 again

i have a 15-20 year time horizon before i need this money, so no problem leaving it alone

i get the dont try to time the market stuff, but just look at the optics, the markets are rallying for no reason, Coronavirus isnt over and wont be gone till a workable vaccine is created (12-18 months min. according to experts), we just had the longest bull market ever, 30 million americans are out of work, millions cant pay their mortgages or rent and the landlords might not be able to pay the mortgages on their rentals as well, no body is buying stuff, and people are saving and paying off debt, credit card balances dropped the most in history(as a percentage) in march (i think i read that)

we have 3 trillion in stimulus spending and a government with no direction or plan to reduce the current national debt that equals GDP

ok chicken little rant over, but why not think critically about an investment vs set it and forget it?

Sounds like you've got it all figured out then.

DadJokes

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Re: Coronavirus Recession? Should i buy bonds now?
« Reply #13 on: May 13, 2020, 09:17:22 AM »

ok chicken little rant over, but why not think critically about an investment vs set it and forget it?

Because historical evidence suggests that you're far more likely to be successful with a set it & forget it investment plan. Those who have successfully timed the market in the past struggle to do the same in the future.

I put about as much faith in anything Dalio says as I do in what Peter Schiff says.

joe189man

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Re: Coronavirus Recession? Should i buy bonds now?
« Reply #14 on: May 13, 2020, 09:30:51 AM »
Sounds like you've got it all figured out then.
[/quote]

Nope, that's why i am here, seeking advice and recommendations from others who have weathered these types of things in the past.

for the record i haven't changed anything with my 401k,


vand

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Re: Coronavirus Recession? Should i buy bonds now?
« Reply #15 on: May 13, 2020, 09:46:00 AM »
Sounds like you've got it all figured out then.

Nope, that's why i am here, seeking advice and recommendations from others who have weathered these types of things in the past.

for the record i haven't changed anything with my 401k,
[/quote]

Well you need to ask some better questions. Instead asking what you should do, try asking questions that will help you understand your attitude to risk so that you can figure out what way to tilt your investments.  How would you sleep if the market halves over the next few years? How would you feel if you took half out and the S&P went to 4000? Both scenarios are entirely possible.

I'll let you in on a dirty little secret here: there is no such thing as a perfect portfolio. Everyone's portfolio is always a work in progress.  People will always be wishing they were slightly more aggressively positioned when the market is rising and less aggressively tilited when the market has fallen, such is human nature. 

And stop worry about what Dalio or anyone else thinks.

joe189man

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Re: Coronavirus Recession? Should i buy bonds now?
« Reply #16 on: May 13, 2020, 02:37:27 PM »
Sounds like you've got it all figured out then.

Nope, that's why i am here, seeking advice and recommendations from others who have weathered these types of things in the past.

for the record i haven't changed anything with my 401k,

Well you need to ask some better questions. Instead asking what you should do, try asking questions that will help you understand your attitude to risk so that you can figure out what way to tilt your investments.  How would you sleep if the market halves over the next few years? How would you feel if you took half out and the S&P went to 4000? Both scenarios are entirely possible.

I'll let you in on a dirty little secret here: there is no such thing as a perfect portfolio. Everyone's portfolio is always a work in progress.  People will always be wishing they were slightly more aggressively positioned when the market is rising and less aggressively tilited when the market has fallen, such is human nature. 

And stop worry about what Dalio or anyone else thinks.
[/quote]


Wow, you need to calm down and get out of this echo chamber now and then, this was never a question about asset allocation, it was about thoughts on hedging short term bets. i get it, folks here don't do that, bringing it up as dumb.

Let's let this thread die now to save future readers any more mustacian frustration

nereo

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Re: Coronavirus Recession? Should i buy bonds now?
« Reply #17 on: May 13, 2020, 05:29:39 PM »
Quote
Wow, you need to calm down and get out of this echo chamber now and then, this was never a question about asset allocation, it was about thoughts on hedging short term bets. i get it, folks here don't do that, bringing it up as dumb.

One can reasonably expect a discussion about buying bonds and hedging short term bets to evoke asset allocation. The general consensus is that one should not alter their AA Willy nilly.

talltexan

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Re: Coronavirus Recession? Should i buy bonds now?
« Reply #18 on: May 15, 2020, 07:53:17 AM »
Your mortgage position should affect your bond allocation.

Body Surfer

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Re: Coronavirus Recession? Should i buy bonds now?
« Reply #19 on: May 15, 2020, 04:15:05 PM »
According to the stock market not only is there not a recession, but there are no problems economically what-so-ever. The market is oblivious to reality. For those who say the market is looking out into the future, it must be 3-5 years out. Incredible lol.

ChpBstrd

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Re: Coronavirus Recession? Should i buy bonds now?
« Reply #20 on: May 15, 2020, 06:19:02 PM »
According to the stock market not only is there not a recession, but there are no problems economically what-so-ever. The market is oblivious to reality. For those who say the market is looking out into the future, it must be 3-5 years out. Incredible lol.

The stock market in China (see FXI) has returned relatively little to investors for decades, despite being the fastest growing large economy in the world. There appears to be a massive leak of money from Chinese corporations to insiders, the governme, or whomever. The result is flat returns.

The stock, bond, and RE market in the US has the opposite problem. Money flooding in from overseas and the treasury is pushing up asset prices.

nereo

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Re: Coronavirus Recession? Should i buy bonds now?
« Reply #21 on: May 15, 2020, 06:28:08 PM »
The stock market is not the economy. 
Anyone who expects them to act in sync has not spent much time looking at economic numbers and market returns.

MustacheAndaHalf

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Re: Coronavirus Recession? Should i buy bonds now?
« Reply #22 on: May 17, 2020, 05:32:19 AM »
By all accounts April should have been the worst month in a century absent all the stimulus-- 20MM unemployment claims, a monumental drop in trade, GDP and productivity.  Yet it wound up being one of the best months for stocks we've had.  Go figure.  Are we going to see a huge drop in May?  Or June?  Or this fall?  Or will we just go sideways for a couple of years? One thing that has happened is a number of companies have started to figure out WFH and limited production after some epic false-starts.
Once you put April in the context of March, it makes a lot more sense.  I disagree with the way you describe it in isolation.

In March, an unknown disease spread to an unknown number of people, panicking markets.  Markets were down -33% within weeks, probably a bear market record.  Significant parts of the economy were shut down, closing many businesses and leaving workers without paychecks.  Congress and the Fed stepped in to provide loans and relief.  All that is context for April, which is missing from your description.  When April started, unemployment numbers were driven by the events in March, which is why markets didn't react.