I dunno, bro. Most of the schtackers have def ditched bonds by now -- or at least understand wth is wrong with owning debt that return below the rate of monetary expansion. What even is the point?

Our friends over at the legacy publication are in desperate need of some Undisc takeover/upbraiding.

Now, if you want to know what kind of morning it is for stocks, government bonds and (weirdly) precious metals, you need only check the oil price. If it has leapt, it is a good bet that the rest are doing badly. If oil traders are calm, others probably are as well.

Integrated markets can be, uh, confusing.

For stocks and government bonds to move together during an energy shock makes sense: faltering growth hurts stocks; inflation hurts bonds; an oil shortage raises both threats at once. But it is not only in recent weeks that the two asset classes have behaved similarly.

yeah, that break has happened on occasion many times in the last 50-odd years. It's one of the reasons for finance as a field, sort of, dying (#1471628). and now:

...whereas bond prices used to rise more often than not when stock prices fell, and vice versa, the two now tend to rise and fall in tandem. That is a problem for investors’ portfolios, because many of them used the old, negative stock-bond correlation to great effect. The logic of the classic 60/40 allocation between the two, for instance, relies on their tendency to fluctuate in opposite directions over short periods while both appreciating in the long run.

"Abandoning shares for good would be foolhardy, since there is no other widely available, tried-and-tested asset class offering similar long-run returns.""Abandoning shares for good would be foolhardy, since there is no other widely available, tried-and-tested asset class offering similar long-run returns."

uh, yeah. OK. Alas, No diversification bonus for our orange coin:

In a recent research note, Antti Ilmanen and Dan Villalon of AQR, a quantitative hedge fund, rattled through some of the most modish alternatives: private credit, “buffer” funds (constructed from equity derivatives) and bitcoin. Proponents argue that these can improve a stock-bond portfolio’s diversification. Yet the researchers found that, over the past five years, each putative substitute has been at least as highly correlated with the S&P 500 share index as American Treasury bonds.

Treasury bonds look good on this front, with a beta of 0.2. Taken in aggregate, the beta of private-credit funds is 0.7 and that of buffer funds is 0.6. Bitcoin’s beta is a whopping 2.1, meaning that its inclusion in a portfolio alongside stocks would amplify equity risk rather than reducing it

uh-hu, and then take the next step by calculating Sharpe ratios. SI-LLY! (Reminder for our non-finance ~econ audience: bitcoin's excess returns more than makes up for its high beta, meaning its inclusion _does_ improve portfolio performance.)

oh no, instead: opposite conclusion. Tradfi really is fucked:

onds now provide a thinner buffer for equity risk. Those who want to shun risk must therefore own more of them, and fewer shares, to do so. Daredevils, by contrast, might as well buy more stocks and pursue higher returns, since bonds now offer less. They might even have a few fewer numbers to check each morning.

archive: https://archive.md/5X9PO