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Old 07-15-2020, 10:24 PM   #61
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Originally Posted by vchan2177 View Post
A large portion of my portfolio are in long term treasuries and I want the interest rates to decline which will increase the value of my long term treasuries.
That will be especially profitable right after rates decline (hopefully not but possibly into negative territory) - any bond held after that would just lose value over time.

US is in the unique situation of being able to print unlimited amount of the world's reserve currency. So our debt is kind of irrelevant: even if nobody else wants to buy US treasuries and finance it, Fed will. But that would definitely lead to domestic inflation - so far we've been able to export it. In which case we may actually see rates increasing...
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Old 07-16-2020, 11:24 AM   #62
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That will be especially profitable right after rates decline (hopefully not but possibly into negative territory) - any bond held after that would just lose value over time.

US is in the unique situation of being able to print unlimited amount of the world's reserve currency. So our debt is kind of irrelevant: even if nobody else wants to buy US treasuries and finance it, Fed will. But that would definitely lead to domestic inflation - so far we've been able to export it. In which case we may actually see rates increasing...
Most of your comments are true. I hold mostly treasuries during a bear market. During a bull market, I hold mostly equities.

I do disagree with your comment that our debt is irrelevant. The reason why the dollar became the world's reserve currency is because the USA is a very stable country and the number 1 economy in the world.

However, if the US starts printing money like hell, the foreign exchange rates will change so that foreign goods will cost more US dollars which is inflationary. There is also a possibility that other countries will abandon the US dollar and make the Chinese Yuan their reserve currency.

This can happen if the US becomes irresponsible in handling the US economy. Other countries may then find that the Chinese Yuan is a more stable currency. If you represent a foreign country and you see that the US is printing trillions and trillion of dollars, would you have confidence in holding the US dollar in your foreign bank which may decrease in value?
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Old 07-16-2020, 12:01 PM   #63
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Most of your comments are true. I hold mostly treasuries during a bear market. During a bull market, I hold mostly equities.

I do disagree with your comment that our debt is irrelevant. The reason why the dollar became the world's reserve currency is because the USA is a very stable country and the number 1 economy in the world.

However, if the US starts printing money like hell, the foreign exchange rates will change so that foreign goods will cost more US dollars which is inflationary. There is also a possibility that other countries will abandon the US dollar and make the Chinese Yuan their reserve currency.

This can happen if the US becomes irresponsible in handling the US economy. Other countries may then find that the Chinese Yuan is a more stable currency. If you represent a foreign country and you see that the US is printing trillions and trillion of dollars, would you have confidence in holding the US dollar in your foreign bank which may decrease in value?
I totally agree about your debt comment: $ position in the world is guaranteed by the US position on the world scene. We do have madly oversized military to back that position up but there are limits to what it can achieve when it comes to the international faith in US economy or leadership. Both are fairly strained imo. Will that lead to other currencies taking over? Eventually. Yuan - and its upcoming digital incarnation - seems like a good candidate (I don't see Euro going anywhere) but I'm not as bullish on Chinase economy as a lot of other people. Their demographic policies for years forcing families to have only one child is biting them in the ass now: as their economy grows and matures, their consumer base ages and shrinks. And reversing those demographic trends is extremely hard. If they lose their position as the manufacturer of the world due to COVID related deglobalization push, they have very few options to grow. I think China needs US much more than we need China.

I look at cryptocurrencies as viable alternatives but not until they stabilize and get accepted as means of direct exchange. because going between cryptos and FIAT is a joke. Current regulations treat them as property and that's not helpful - imagine your every grocery or coffee shop transaction being treated (and taxed) as equity sell/purchase. You'd have to keep track of everything in order to get taxed properly. There are hybrid approaches to transacting with cryptos like the prepaid Visa debit card from crypto.com. You fill it up and spend with FIAT but get rewarded with MCO - not unlike airline miles or points except that MCO is traded on the exchanges and can grow (or decline) in value - like equity.

But I think we got to the point where some of the more established cryptos are seen as long term storage of value (volatility 'n all) - if USD weakens, their position will strengthen. That's when it will get interesting: it would be in US interest to outright ban them but given how decentralized they are it may simply be impossible...if you don't need FIAT or banking system to transact a ban will be toothless.
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Old 07-17-2020, 06:05 AM   #64
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vchan2177 >>> thank you for that information. It will be interesting to see what happens if going negative. Not sure I want to find out thou.
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Old 07-17-2020, 06:18 AM   #65
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Originally Posted by vchan2177 View Post

However, if the US starts printing money like hell, the foreign exchange rates will change so that foreign goods will cost more US dollars which is inflationary. There is also a possibility that other countries will abandon the US dollar and make the Chinese Yuan their reserve currency.
US already prints money like hell. This is how Fed backstops markets.

So you are saying it may be wise to own International ETFs since those are effected by currency exchange rates?
IE: VXUS, VGK, VWO
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Is anyone betting on negative interest rates?
Old 07-17-2020, 07:15 AM   #66
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Is anyone betting on negative interest rates?

I respect everyone’s knowledge but I think the lack of consensus best makes the case for indexing, for my own money. The Vanguard total U.S. bond index is up 8.96% for 2020. There is a dynamic called the “flight to safety” and it is global. The index fund already contains long term bonds in proportion, helping its yield now and in case we go negative. The total international bond index is up 4.04%, which beats a sharp stick.

I’m a Boglehead so I don’t bet and prefer to buy the casino.
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