So Who Is Getting Out of Bonds?

N

novaman

Recycles dryer sheets
Joined
May 12, 2007
Messages
444
So with all that is in the news about the debt ceiling, and Moody's possible downgrade of the US. Anybody clearing out of bonds right now? and if so, where are you parking your money? (I know I know- sounds like a dirty market timer!)
 
I think the time to get out of bonds will be shortly before the end of QE13. There should be a period in there where the gov't takes a break from debasing the currency and rates will start creeping up to -2% or so.
 
I don't see any corporations getting downgraded because of this, so it should be no problem investing in investment-grade corporate bonds or short-term corporate bonds.

Also emerging markets don't seem to have all the problems of the US, Europe, and Japan ... even if China has to keep raising interest rates, so I doubled my position in emerging markets recently because EM has been the worst performing equity asset class this year.
 
Since modern money has no intrinsic worth it is only a promise to provide a understandable measure of value into the future. When the US defaults, and I'm convinced that we have no other option, there will be a great deal of short term confusion.

It will not be the end of the world. In fact historically it is more the norm for sovereign dept and currencies to go Kaput over time than it is for them to have ever lasting value. Cooking oil, Land, precious metals, family, friends, good health and even dividend paying international companies that have good business practices will still have value. It will just be difficult to make sense out of that value because we have used the dollar as our standard of measurement for so long. Very shortly a new standard will arrive. Who knows we may all be using the Canadian looney before it is over be cause it seems to be a pretty stable currency. :)
 
We're invested per asset allocation in a very low cost bond index fund and we intend to stay there.
 
Hmmm.....the bond fund in my IRA is nearly 50% in US Govt bonds. The stock portion (S&P Index fund) of my IRA had been getting a little high lately when the market was nearing 13k recently but I did not do any rebalancing from stocks into bonds. The stock fund also paid a big dividend a few days ago. Now I am torn about rebalancing into that bond fund with its large USG holding.
 
obgyn65 said:
I am keeping my municipal bonds.
Click to expand...

I have a significant postion in municipal bonds too. This whole "default on the fed debt" thing has me thinking (always dangerous) regarding that. When the feds default, will they be opening the door for the states and municipalities to be more prone to default? Leadership by example?
 
youbet said:
I have a significant postion in municipal bonds too. This whole "default on the fed debt" thing has me thinking (always dangerous) regarding that. When the feds default, will they be opening the door for the states and municipalities to be more prone to default? Leadership by example?
Click to expand...

I have about 10% of my holdings in muni bonds. I don't see states and localities seeking to mimic the feds in a race-to-the-bottom default scenario. The states and localities have their own budgetary issues, balanced budget amendments, income streams, and expenses. The elected leaders like to boast about their bond ratings for political gain so any downgrade would undercut those bragging rights.
 
Most of the dire predictions of a default are political posturing. US debt payments have first priority. The major hit will be to government workers that will theoretically become unemployed. However, past "shutdowns" have always resulted in the actual Federal employees being "made whole" so they effectively got paid vacation days (pretty disgusting IMHO). Another however, contract scum (like me) got nada. They were unpaid days.

Back to the original question, I'm not doing anything different about my US bond holdings.
 
I'm not changing.

I don't know of an easy-to-buy alternative that wouldn't be hit by a gov't default, and which hasn't already seen a run up in price.
 
Someone will blink, maybe both sides. For all the posturing now, I think everyone realizes that NOT increasing the ceiling to force the government to stop funding and paying for some obligations is simply not an option. But there is a lot of brinksmanship going on, and I think it's a matter of who blinks first -- but someone will, just like they did when they extended the Bush tax cuts for a couple years. No one wanted the cuts to go away for the middle class, so at the 11th hour something came together.

I suspect the same will happen here.
 
2B said:
Most of the dire predictions of a default are political posturing. US debt payments have first priority. The major hit will be to government workers that will theoretically become unemployed.
Click to expand...
You're missing the bigger picture. If we hit the debt ceiling and start defaulting on our obligations, our credit rating tanks. Instantly. Then all the trillions of dollars we've borrowed will become MUCH MUCH more expensive to refinance when the notes come due. It would cause a massive and very rapid increase in the nation's interest expenses -- which is already $0.5 Trillion/yr at our current AAA rating. That would NOT be good.
 
I thought this thread was "Who is getting out of bounds?" I am so disappointed.

Ha
 
haha said:
I thought this thread was "Who is getting out of bounds?" I am so disappointed.

Ha
Click to expand...


Or, who "has slipped the surly bonds of" ... of...work, perhaps? I dunno. My bonds haven't been too surly lately. Love those dividends. :LOL:

High Flight​

by John Gillespie Magee, Jr.​

Oh, I have slipped the surly bonds of earth,
And danced the skies on laughter-silvered wings;
Sunward I've climbed, and joined the tumbling mirth
Of sun-split clouds...and done a hundred things
You have not dreamed of...wheeled and soared and swung
High in the sunlit silence. Hov'ring there,
I've chased the shouting wind along, and flung
My eager craft through footless halls of air.
Up, up, the long, delirious burning blue
I've topped the windswept heights with easy grace
Where never lark, nor even eagle flew.
And while with silent, lifting mind I've trod
The high untrespassed sanctity of space...
...put out my hand, and touched the face of God.​
 
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oooh those kind of bonds.. never mind i was thinking of something else lol.

whips and chains and things that sting,these are a few of my favorite things, la la la la..

ha ha ha ha
 
haha said:
I thought this thread was "Who is getting out of bounds?" I am so disappointed.

Ha
Click to expand...

This is what happens when you foster unrealistic expectations.
 
If the US does default (huge IF) I think we had all better be in gold and lead (aka "money" and bullets). Just my (glass half empty) opinion. :cool:
 
Michael Burry- perhaps the only man to have forseen this financial crisis as early as 2003, (and he made a killing betting against the subprime market) Gave an interesting lecture at Vanderbilt this past Spring. It is well worth the 30 minutes to hear his thought process. In the lecture it is evident that he does not have a very optimistic view of the future of the United States economy.

At the end of this lecture, he half jokingly says that it might be a good idea to open up a Canadian bank account. Do you think there would be safety in moving to a foreign currency??

‪Michael Burry on the financial crisis‬‏ - YouTube
 
I've never been in bonds :)

100% stocks all the way.

I may rethink that as FIRE gets a little closer.
 
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