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Old 06-11-2020, 08:22 PM   #621
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How do you figure that? The Vanguard total bond index is having a strong year, up 6.6% already, while stocks are negative. The Fed just said they will keep interest rates at near zero for some time to come.

Vanguard VBTLX is having a strong year because it is 63.3% government bonds which always do well in a bear market. Read my previous comment on bond's performance during the last recession. However, VBTLX also have 17.6% Baa corporate bonds. Baa corporate bonds are higher risk during a bear market if some of the Baa companies goes bankrupt. This is why I invest in 100% treasury bonds such as VUSUX to eliminate that risk. VBTLX is still a good fund to have....but all the companies associated with the Baa corporate bonds in VBTLX must survive the recession. Too early to tell now since bankruptcies do take time.
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Old 06-11-2020, 08:38 PM   #622
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Don't worry, the Fed is loading up their guns with more $trillions. Everything will be bailed out as needed (hedge funds, Reits, banks, bond funds, etc.). Remember, JP said they have more "tools". All will be good and the flowers will bloom again.

The government will pick and choose which one to bail out. During the last recession, the government bailed out GM and let Lehman Brothers fold. The reason: Letting GM fold will cost too many blue collar jobs while Lehman Brothers had less jobs at stake and Lehman Brothers made terrible decisions on their investments. The Fed will let some inefficient companies to fold while saving other companies to protect jobs. I would hesitate buying equities from companies with below average balance sheet or buying bonds with less than AAA, AA, A rating.
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Old 06-11-2020, 08:55 PM   #623
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The government will pick and choose which one to bail out. During the last recession, the government bailed out GM and let Lehman Brothers fold. The reason: Letting GM fold will cost too many blue collar jobs while Lehman Brothers had less jobs at stake and Lehman Brothers made terrible decisions on their investments. The Fed will let some inefficient companies to fold while saving other companies to protect jobs. I would hesitate buying equities from companies with below average balance sheet or buying bonds with less than AAA, AA, A rating.
Bold above by me.....I assume the "inefficient companies" that the Fed letfold didn't have employees?

It's a shame that the Fed picks and chooses what companies to let go under the rug seeing we apparently are supposed to have a capitalistic economy. Not getting political, but free markets should allow for the inefficiencies of business without playing favorites by government.

(of course we know how it really works...)
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Old 06-12-2020, 04:49 AM   #624
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How do you figure that? The Vanguard total bond index is having a strong year, up 6.6% already, while stocks are negative. The Fed just said they will keep interest rates at near zero for some time to come.
My bond market reference wasn't to bond funds. It is more in line with what Freedom56 is stating that some companies can be heading to bankruptcy and some of the current bond prices relate to this potential concept.
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Old 06-12-2020, 06:31 AM   #625
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My bond market reference wasn't to bond funds. It is more in line with what Freedom56 is stating that some companies can be heading to bankruptcy and some of the current bond prices relate to this potential concept.


Got it. I agree there are a lot of zombie companies who couldn’t pay their enormous debts without help, which is scary. I like bond index funds. Part of the reason the total index fund is so strong, in addition to low interest rates, is the flight to safety happening with treasuries.
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Old 06-12-2020, 07:10 AM   #626
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Vanguard VBTLX is having a strong year because it is 63.3% government bonds which always do well in a bear market. Read my previous comment on bond's performance during the last recession. However, VBTLX also have 17.6% Baa corporate bonds. Baa corporate bonds are higher risk during a bear market if some of the Baa companies goes bankrupt. This is why I invest in 100% treasury bonds such as VUSUX to eliminate that risk. VBTLX is still a good fund to have....but all the companies associated with the Baa corporate bonds in VBTLX must survive the recession. Too early to tell now since bankruptcies do take time.
I always thought this too....then the Fed basically committed to propping up all the Baa corporate stuff. So these marginal companies have access to debt at low rates and most will be able to survive on that.
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Old 06-12-2020, 07:20 AM   #627
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Bottom line is that with COVID cases increasing in a bunch of states that opened too early
The number of new cases are highest by order of the largest states population rank - CA, then TX, then FL. So I don't see the relationship to opening too early - whatever date that was.
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Old 06-12-2020, 07:44 AM   #628
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The number of new cases are highest by order of the largest states population rank - CA, then TX, then FL. So I don't see the relationship to opening too early - whatever date that was.
Which really doesn't make sense in light of the approach Sweden took.
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Old 06-12-2020, 11:02 AM   #629
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Bold above by me.....I assume the "inefficient companies" that the Fed letfold didn't have employees?

It's a shame that the Fed picks and chooses what companies to let go under the rug seeing we apparently are supposed to have a capitalistic economy. Not getting political, but free markets should allow for the inefficiencies of business without playing favorites by government.

(of course we know how it really works...)
In a pure capitalist system without government involvement, there is corruption because a capitalist system is based on greed. For example, we all know that as long there is competition is there is efficiencies. If there is a monopoly, there is no competition and the public gets gouged.

The government is supposed to regulate this. The government gets to pick and choose which company to save based on jobs and jobs also create tax revenues. They let Lehman Brothers fold because most of the employees are white collar who are skilled employees and can easily get a replacement job with another company. GM is mostly blue collar workers who would have a difficult time getting a job from Ford or another company. Also do not forget the supply chain companies to GM which also involve even more jobs. There was very little supply chain jobs at stake with Lehman Brothers.

The political power rest with senators and congressman/women. You can bet your mortgage that there was politics behind Lehman Brothers and GM. Fast forward to today. Currently, the airline industries, hotel industries, cruise industries, Boeing, rental cars industries, retail industries are in trouble. I doubt very much that the government will save all of them. For example, I do not see the government helping JC Penney or Hertz. On the other hand, I expect a bailout for Boeing if this becomes necessary.
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