Gyroscopic Investing

I think i just saw somewhere in the last week that 100% of the national debt added since Covid (Aprilish) matches the growth on the Fed's balance sheet. This implies all new bond issuance essentially going to the central via newly created money.

Yeeesh. Buyer of last resort. Will be interesting how high rates have to go to entice net buying from non government institutions or foreigners. How can the piddly interest on bonds ever hope to match inflation?

As horrible as Trump has been for debt growth, if he hands the keys over to Kamala I've got to think it will get worse.

SomeDude wrote: ↑Tue Nov 24, 2020 1:04 am
As horrible as Trump has been for debt growth, if he hands the keys over to Kamala I've got to think it will get worse.

Based on what? Democrats finance projects via taxes. Republicans finance projects via debt.

mukramesh wrote: ↑Tue Dec 01, 2020 3:28 pm

SomeDude wrote: ↑Tue Nov 24, 2020 1:04 am
As horrible as Trump has been for debt growth, if he hands the keys over to Kamala I've got to think it will get worse.

Based on what? Democrats finance projects via taxes. Republicans finance projects via debt.

Based on the economy going into a tailspin from the aforementioned massive tax increases promised, more regulation, entire industries targeted for destruction like energy, a nightmarish federal coronavirus lockdown, green new deal horsecrap, reparations or whatever through money printing, new wars, student loan forgiveness.

Basically everything Kamala and Sleepy Joe were promising, unless you think the Republican Senate can hold them off.

Let's not make this political. Hard to do with an investment like long bonds during an election. Let's just say i dont think the long term outlook for then is bright regardless of politics.

SomeDude wrote: ↑Thu Dec 03, 2020 2:57 am

mukramesh wrote: ↑Tue Dec 01, 2020 3:28 pm

SomeDude wrote: ↑Tue Nov 24, 2020 1:04 am
As horrible as Trump has been for debt growth, if he hands the keys over to Kamala I've got to think it will get worse.

Based on what? Democrats finance projects via taxes. Republicans finance projects via debt.

Based on the economy going into a tailspin from the aforementioned massive tax increases promised, more regulation, entire industries targeted for destruction like energy, a nightmarish federal coronavirus lockdown, green new deal horsecrap, reparations or whatever through money printing, new wars, student loan forgiveness.

Basically everything Kamala and Sleepy Joe were promising, unless you think the Republican Senate can hold them off.

SomeDude wrote: ↑Thu Dec 03, 2020 2:59 am Let's not make this political. Hard to do with an investment like long bonds during an election. Let's just say i dont think the long term outlook for then is bright regardless of politics.

I'm struggling to respond to this without making it political

mukramesh wrote: ↑Thu Dec 03, 2020 12:18 pm I'm struggling to respond to this without making it political

The struggle is real. How about this, regardless of who wins the election, i think long term bonds will have a lower return in the next 10 years compared to stocks, gold, and probably even cash.

I own the latter 3 plus silver, but no LTTs for that reason.

I don't try to project returns at an arbitrary point in the future (your next 10 years for example). My thought is if volatility is high, having all 4 assets will give me better rebalancing opportunities along the way.

For example, although the standard PP is 14.3% YTD (etfreplay), my own portfolio did much better since I hit a rebalancing band when stocks were at -30% in March.

Take a look at Tyler's article on bond convexity. Most people do not understand how this works: https://portfoliocharts.com/2019/05/27/ ... convexity/

Suffice to say, the 30 year treasury could still do much better than you think in coming years if the economy is weak. Bond yields are going up right now, but for the good reason... all economic data is currently pointing at an economic upturn in 2021. This doesn't mean the bottom is in for long bonds though. Say we get 2 more years to the economic cycle. Bonds yields will mean revert up for 2 years. This would give people in a buy & rebalance portfolio a chance to "buy the dip" before the next secular bear market in stocks begins and bond yields go back to all-time lows. If the next secular stock bear market happens at any point in the next few years the yield bottom is not in, and significant capital appreciation can be had from long bonds. Not saying this is a guaranteed thing, but I would say it is likely (and completely irregardless of who is in the White House). And if stocks go into another deflationary "lost decade"... well bonds could still become *the* asset of the 2020's.