Re:Why is the stock market rallying when the economy is so bad?
by arcticbull on Monday May 11, 2020 @02:49AM
(#23139504)
> You can expect around 1.5% in the US for IG bonds.
Sure, but the fed's target inflation rate is around 2%. That means you're in fact losing 0.5% of your purchasing power per annum. That's just losing money slower.
There is in fact, no alternative.
Re:Why is the stock market rallying when the economy is so bad?
by mixmastamyk on Monday May 11, 2020 @03:24AM
(#23139673)
Also the interest will be taxed.
Re:Why is the stock market rallying when the economy is so bad?
by Galanwe on Monday May 11, 2020 @04:17AM
(#23139962)
Not sure how taxes work in the US exactly. Here in Hong Kong we have withholding tax but no capital gain tax, so you can effectively buy zero coupon 3 month govy notes tax free.
Re:Why is the stock market rallying when the economy is so bad?
by blaser-waffle on Monday May 11, 2020 @09:16AM
(#23141739)
Depends on the bonds. Bonds issued by the government (local/municipal/etc.) are often not taxed as an incentive to get you to lend money to the government.
Re:Why is the stock market rallying when the economy is so bad?
by jopsen on Monday May 11, 2020 @02:57AM
(#23139546)
Isn't currency (and many others) more of a zero sum bet -- useful for hedging if you are a business with expenditures in one currency and income in another.
But if you're looking to invest cash on hand, and looking for a long-term upside. I'm not sure currency is good idea.
Re:Why is the stock market rallying when the economy is so bad?
by Galanwe on Monday May 11, 2020 @04:22AM
(#23139989)
Definitely not a 0 sum game. You can perfectly have real strategies and earn money just betting on currencies, either intra curve (buy/sell different maturities on the same currency) or cross curve (one currency versus an other one).
Theres actually quite a lot of hedge funds doing that.
You will most likely want to start with a "carry" trade: buying a cheap currency by selling your $USD, and enjoy the higher interests on that currency.
Re:Why is the stock market rallying when the economy is so bad?
by TomMarius on Monday May 11, 2020 @03:19AM
(#23139650)
No, it's not "zero sum bet". There are real market fundamentals which you can take advantage of.
Re:Why is the stock market rallying when the economy is so bad?
by evandijk70 on Monday May 11, 2020 @02:31AM
(#23139420)
Most bonds in the EU are below 0% interest rate.
Re:Why is the stock market rallying when the economy is so bad?
by Galanwe on Monday May 11, 2020 @04:23AM
(#23139993)
Hu... No. Only short term notes are negative.
Re:Why is the stock market rallying when the economy is so bad?
by kevin_thibedeau on Monday May 11, 2020 @03:14AM
(#23139624)
High interest savings accounts are still beating bonds.
- bonds: Definitely not 0% interest rate, definitely better than cash. You can expect around 1.5% in the US for IG bonds. This is all relative to the default risk of course, the stronger your central bank, the less risky are the bonds, the less interests you earn.
- Real estate: you don't have to own it directly. This exposes yourself to a huge idiosyncratic risk. You can easily get real estate exposure while maintaining diversification and liquidity through REITs, which are trendy since at least 10 years.
There's a whole lot of other investments if you dare to look into it. You can play with currencies (FX, IRS) if you have macroeconomic views. You can play with debts (CLO, CDS) if you have views on the corporate debt market, etc.