Is the stock market going to tank?

[Brock Landers]

Yes. Expounding on this is how safe do you think the yield is? In BINC I’d say pretty safe. It has an overall A- credit rating compared to the category at BBB+.

A lot of people say don’t own bond funds because of duration and (constant) maturity risk. But, that’s why I own bond funds. I want a steady duration and maturity profile because I can predict yield for a longer time frame.

Blackrock, like Pimco, being so big they are first in line for the best offerings and provide an extra measure of safety and liquidity.

So a few thoughts here.

A yield being safe can go a few ways- safe from the market selling off and the yield going higher? Creating a great buying opportunity? Safe from duration/term risk if the Fed were to cut and your yield goes down? Rates/inflation going up and you are term’d out, longer than you should be? - from a credit standpoint, businesses are in good shape. Strong balance sheets. A strong consumer. Strong economy still. But spreads are TIGHT. I think duration-wise, it’s like a 3 year so nothing too long. Much more biased risk-wise to the credit side, which you’d expect. But the yield isn’t what the risk is. It’s the total return in a sell off scenario. The sharpness and duration of a sell off (rates or credit) need to be somewhat offset by the yield. Lose 3% on price gain 7% on coupon net 4% total return (and blackrock can assess what they want to ACTUALLY pay out in the distributions…which is important). For BINC I think looking at the spread duration contribution they get from each sector (corp, mtg, rates) is helpful.

I wouldn’t put too much stock in blackrock or pimco or whoever being big and first in line. There’s big players out there buying big chunks of all the same bonds. And buying/selling more often, doing more business with the sell side. Participating in more new issue (think index funds…they buy everything so issuers will throw them bonds first,generally).

Bonds are great. More predictable to align with your goals and objectives (income). Less upside obviously but that’s the give up.

[summit]

And if you aren't retiring for 15 + years where would you deploy?

[Brock Landers]

[emoji638]][emoji639][emoji[emoji6[emoji640][emoji638]][emoji640][emoji639]]][emoji[emoji6[emoji640][emoji638]][emoji[emoji6[emoji640][emoji638]][emoji640][emoji[emoji6[emoji640][emoji638]][emoji640][emoji6[emoji640][emoji638]]]][emoji[emoji6[emoji640][emoji638]][emoji639][emoji[emoji6[emoji640][emoji638]][emoji640][emoji639]]]] + years where would you deploy?

You want like a model portfolio with a dozen ish ETF’s? or a couple things that would likely pay off over fifteen years even if they went to shit in the next three?

I don’t get as deep into individual stocks anymore but…

Bitcoin
Palantir
Abbvie

[4matic]

And if you aren't retiring for fifteen years where would you deploy?

Dividends contributed up to forty percent of long term stock gains. With SPY yielding so little now and the risk premium at zero owning some bonds is not wrong. A decade of zirp and recent capital losses in 60/40 have soured people on the sector.

[Brock Landers]

Spy div yield is no worse than credit spreads, historically speaking. And I’d argue market leadership for the past fifteen years wasn’t driven by dividend yielding stocks. So it matters little.

Bonds have their role. But with inflation sticking around three % and spreads so tight (so the bulk of yield is rate-driven)…outside of a true need for income stability or a degree of portfolio diversification (em HC debt, duration)…I’ll forego a six % yield (three% real return) and stick with equities.

[liv2ski]

So a few thoughts here.

A yield being safe can go a few ways- safe from the market selling off and the yield going higher? Creating a great buying opportunity? Safe from duration/term risk if the Fed were to cut and your yield goes down? Rates/inflation going up and you are term’d out, longer than you should be? - from a credit standpoint, businesses are in good shape. Strong balance sheets. A strong consumer. Strong economy still. But spreads are TIGHT. I think duration-wise, it’s like a 3 year so nothing too long. Much more biased risk-wise to the credit side, which you’d expect. But the yield isn’t what the risk is. It’s the total return in a sell off scenario. The sharpness and duration of a sell off (rates or credit) need to be somewhat offset by the yield. Lose 3% on price gain 7% on coupon net 4% total return (and blackrock can assess what they want to ACTUALLY pay out in the distributions…which is important). For BINC I think looking at the spread duration contribution they get from each sector (corp, mtg, rates) is helpful.

I wouldn’t put too much stock in blackrock or pimco or whoever being big and first in line. There’s big players out there buying big chunks of all the same bonds. And buying/selling more often, doing more business with the sell side. Participating in more new issue (think index funds…they buy everything so issuers will throw them bonds first,generally).

Bonds are great. More predictable to align with your goals and objectives (income). Less upside obviously but that’s the give up.

Brock, I want to thank you for all that. It was said so my simple mind could grasp it. Much appreciation to you

Sent from my moto g stylus 5G (2022) using Tapatalk

[4matic]

Spy div yield is no worse than credit spreads, historically speaking. And I’d argue market leadership for the past fifteen years wasn’t driven by dividend yielding stocks. So it matters little.

Bonds have their role. But with inflation sticking around three % and spreads so tight (so the bulk of yield is rate-driven)…outside of a true need for income stability or a degree of portfolio diversification (em HC debt, duration)…I’ll forego a six % yield (three% real return) and stick with equities.

True. I’d argue that credit spreads are tight in the same way dividends haven’t mattered in recent years. Also. There isn’t as much absolute junk financing anymore since there aren’t that many small cap ipo’s.
Companies stay private longer and source the public debt markets less.

That said. I’ve been reading that private credit is the next time bomb

[liv2ski]

With the below said, good for bonds?

It “seems almost unavoidable at this point” that the United States is “headed for a deep, deep recession” thanks to the Trump administration’s massive government job cuts and pullback from official contracts, a former Obama-era Department of Labor economist has warned.

Jesse Rothstein, a professor of public policy and economics at the University of California, Berkeley, predicted on BlueSky this week that the employment report for March 2025 will show “bigger job losses than any month ever outside of a few in 2008-9 and 2020.” (I.e. — when America was hit by the 2008 financial crash and then, later, by the coronavirus pandemic).

https://www.huffpost.com/entry/jesse...b05145b9c532f7

[skaredshtles]

A deep recession is basically no good for ANYTHING or anybody. You could always short equities if you really believe it - but... thats really risky.

[4matic]

[emoji638]][emoji640][emoji639]][emoji638][emoji[emoji6[emoji640][emoji638]][emoji640][emoji6[emoji640][emoji638]]][emoji638][emoji6[emoji640][emoji637]][emoji[emoji6[emoji640][emoji638]][emoji640][emoji6[emoji640][emoji638]]][emoji639]]A deep recession is basically no good for ANYTHING or anybody. You could always short equities if you really believe it - but... thats really risky.

It’s good for young people that don’t own assets.

[skaredshtles]

It’s good for young people that don’t own assets.

If they can maintain employment I suppose that could be true...

[summit]

And if they have enough money to buy assets

[skaredshtles]

And if they have enough money to buy assets

Young people dont have any money.

[4matic]

So they don’t have money now. What they don’t own, or rent gets cheaper. Sounds like a win to me.

[shroom]

matic;[emoji[emoji6[emoji640][emoji638]][emoji640][emoji639]][emoji638][emoji[emoji6[emoji640][emoji638]][emoji640][emoji6[emoji640][emoji638]]][emoji638][emoji6[emoji640][emoji637]][emoji637][emoji638]]It’s good for young people that don’t own assets.

IMO so insignificant compared to institutional moves at this point it’s totally misleading to even discuss

[4matic]

It worked out pretty well for the selfish boomers when asset prices tanked in the late seventies and early eighties

[4matic]

Now boomers own 1.5 houses and are overweight tech stocks. Reversion to the mean..

[liv2ski]

Young people dont have any money.

Not true, I know youngsters in their 30's with $500k+. So ya, let's see these assets prices tank.

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[skaredshtles]

Perhaps I should have put the sarcasm smiley in there for the Boomers.

[Hopeless Sinner]

It worked out pretty well for the selfish boomers when asset prices tanked in the late seventies and early eighties

You forgot the dot com stock market meltdow, 9/11 (we closed on a home 12 days prior) and Im pretty sure asset prices tanked again in 2008 and 2009. We waited till 2015 to buy a retirement home and prices were still depressed and declining in many places. There were many oppurtunties along the way but lack of cash and confidence kept many on the sidelines.

[Brock Landers]

With the below said, good for bonds?

It “seems almost unavoidable at this point” that the United States is “headed for a deep, deep recession” thanks to the Trump administration’s massive government job cuts and pullback from official contracts, a former Obama-era Department of Labor economist has warned.

Jesse Rothstein, a professor of public policy and economics at the University of California, Berkeley, predicted on BlueSky this week that the employment report for March 2025 will show “bigger job losses than any month ever outside of a few in 2008-9 and 2020.” (I.e. — when America was hit by the 2008 financial crash and then, later, by the coronavirus pandemic).

https://www.huffpost.com/entry/jesse...b05145b9c532f7

If we go into a deep deep recession, at some point (and for a certain period of time) really only us treasuries will perform well. Other bonds have so much performance tied to rates (80% of yield comes from base TSY rate) BUT there’s so far for spreads to go the other way…

It’s the preceding 2 years and the 3 years after this period, whenever it is. You earn return in the preceding and post period.
If you can pinpoint the 8 month period where things really go to shit market-wise (not economy or anything like that, the actual market) put it in govt bonds. Better yet,short stocks. And then get back into risk!

I’m guessing you don’t know the tipping point and for how long. No one does.

Also, economists are terrible terrible market prognosticators. Can’t wait for this jobs report. Jobs down, Fed cuts, MASSIVE run in equities. That’s the playbook.

[4matic]

You forgot the dot com stock market meltdow, 9/11 (we closed on a home 12 days prior) and Im pretty sure asset prices tanked again in 2008 and 2009. We waited till 2015 to buy a retirement home and prices were still depressed and declining in many places. There were many oppurtunties along the way but lack of cash and confidence kept many on the sidelines.

The SP500 traded 95 in 1985. bRK.a traded 600

[Hopeless Sinner]

^^^ In 1985 I made about 10k working for the USFS and SV Co. I was barely able to survive much less save to invest or buy a house.

[dan_pdx]

Question on selling covered calls. I received some RSUs from a past employer and didn't sell them when I should have during the Covid bubble. Now I keep them to remind me I'm a fucking idiot who can't time the market. I'm wanting to venture into covered calls for the first time and wondering: I've seen that there are often some weird transient price spikes when presumably one algo sells like two shares to another outside of market hours at a screwball price. How likely is it that a call would get exercised as a result of one of those spikes?

[LeeLau]

Question on selling covered calls. I received some RSUs from a past employer and didn't sell them when I should have during the Covid bubble. Now I keep them to remind me I'm a fucking idiot who can't time the market. I'm wanting to venture into covered calls for the first time and wondering: I've seen that there are often some weird transient price spikes when presumably one algo sells like two shares to another outside of market hours at a screwball price. How likely is it that a call would get exercised as a result of one of those spikes?

Extremely unlikely