As Interest rates are rising, Is it good idea to buy some BOnd ???

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Martin Everson

Offshore Retiree
Staff member
Mentor Group Gold
Elite Member
I sold all my bonds in here in March. I saw the writing on wall with inflation. And seems I timed it exactly right in hindsight thu&¤#.



It is not a good time to buy bonds unless you feel that inflation will be short lived and we will be back down to 0% rates. When inflation is currently over 8% in EU, US and UK. Then your real yield is effectively -5% :confused:. Not a very good investment at all if you earned -5% a year.
 

JohnnyDoe

Mentor Group Gold
Funny to see how the advocates of the modern portfolio theory try to handle fixed income allocation now
 

JohnnyDoe

Mentor Group Gold
It's funnier to see the Crypto people lose -90% of their net worth and still come back to make fun of the "portfolio people"

Most crypto people will sell their left testicle right now to be down only -15% from the top.
You didn’t get my point.
Crypto people are cool with whatever retracement from ATH, as usual. Otherwise they would already be extinct, given the lack of sufficient amounts of testicles available.
 

Rzeznik

Active Member
Is it Good Idea???
Only if you will be able to time bond bottom in rising interest rates environment once FED kills inflation then is good buy bonds beacouse rates will be lower in future. Inflation will eat your "bond" and buying power. Is hard to tame inflation when inflation is 9% in US while rates 2%.
Imagine FED hike to 10% tommorow to kill inflation then you can jump on bond train becouse inflation will fall and bonds should be already at about 10% and lock your interest for long. But this is not happening and won't happen soon.
 

Silvio

Entrepreneur
You didn’t get my point.
Crypto people are cool with whatever retracement from ATH, as usual. Otherwise they would already be extinct, given the lack of sufficient amounts of testicles available.
It's great that you're "cool" with being down -90%, I thought we're comparing portfolios though and not the ability to withstand pain.

And about your question of how to explain bond allocation, it's very easy to explain actually:

S&P = -24.54% from ATH
Nasdaq = -33.93% from ATH
Crypto = -90% from ATH (approx)
vs
Global Aggregate Bond UCITS ETF (VAGP) = -14.12% from ATH

So even in these incredibly bad times for bonds, global bonds still did what they supposed to do - be the defensive part of the portfolio.
 

JohnnyDoe

Mentor Group Gold
So even in these incredibly bad times for bonds, global bonds still did what they supposed to do - be the defensive part of the portfolio.
that’s not what they are supposed to do according to the modern portfolio theory. Firstly, the sigma adjusted performance is equal to those of stocks. Secondly, the fixed income that they are supposed to generate is effectively a fixed loss being lower than inflation. QE has fucked all up, we probably need a new portfolio theory.
 

Golden Fleece

Entrepreneur
QE has fucked all up, we probably need a new portfolio theory.
For once, I agree with you. The 60/40 stock and bond portfolio is dead, at least until capitalism returns and the governments of the world end their mad experiment with the financial repression of artificially low interest rates that skew market forces. Unfortunately, that will occur only after great pain, when those governments have no other choice but to capitulate to free market forces -- as they eventually must.
 
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