Out of balance

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buddtholomew
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Re: Out of balance

Postby buddtholomew » Wed Jan 03, 2018 4:27 pm

I'm not saying put your head in the sand and ignore.
What I am suggesting is not trying to determine which of the components should be dropped from the portfolio because it is so obvious that rates have to go up. All those geniuses that said bond rates will sky rocket and that stocks are over-valued....these are the people I am talking to.
glennds
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Re: Out of balance

Postby glennds » Wed Jan 03, 2018 5:24 pm

buddtholomew wrote:I'm not saying put your head in the sand and ignore.
What I am suggesting is not trying to determine which of the components should be dropped from the portfolio because it is so obvious that rates have to go up. All those geniuses that said bond rates will sky rocket and that stocks are over-valued....these are the people I am talking to.


Got it, thanks for clarifying! I was preaching to the choir, ha.

You brought up an interesting point though. I once heard Warren Buffett say something to the effect that there is a peculiar natural bias among us humans thinking that the more complicated something is the better it must be, and conversely the simpler something is the more primitive and worse it must be. Obviously we all know the opposite is very often the case.
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Re: Out of balance

Postby steve » Thu Jan 04, 2018 9:00 am

Way I look at it I would gladly by long term bonds to re balance , If interest rates keep rising and the value goes down I would just keep tax loss harvesting, No one can predict the future and things do not always go as expected. If the value keeps going down until it once again hit the lower re balance band of 15% I would just re balance again. At some point when things change it would explode to the upside.
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Re: Out of balance

Postby Don » Wed Jan 10, 2018 10:33 am

stuper1 wrote:Think for yourself all you want, but also go back and look at the predictions for many of the last years about long bonds. The "experts" have been saying they will lose value for years, and in fact what has happened is that many years they have been the biggest winner.

http://www.businessinsider.com/bond-mar ... ch-2017-10

"Bond guru Jeffrey Gundlach has been sounding the alarm on a Treasury market selloff for some time now. On Tuesday, the CEO and founder of DoubleLine Capital took his warning to a whole new level, after the US 10-year yield crossed the 2.40% level, putting in its highest print since May.

"The moment of truth has arrived for secular bond bull market!" Gundlach tweeted. "Need to start rallying effective immediately or obituaries need to be written."

The end of the secular bond bull market would be a significant event. For more than three decades, bond investors have enjoyed massive returns as bond yields pressed lower and lower. Since 1981, the 10-year yield has fallen from near 16% to below 2%, luring in more and more investors along the way. "
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Cortopassi
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Re: Out of balance

Postby Cortopassi » Wed Jan 10, 2018 2:07 pm

I don't think anyone attempted to answer my bond question in another topic, namely, if the bond bull is dead, does that mean a place like Italy, see below, is less risky to park your money?

I don't believe it. I think this is a blip and we'll be back lower soon enough.

Image
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Re: Out of balance

Postby technovelist » Wed Jan 10, 2018 2:14 pm

Cortopassi wrote:I don't think anyone attempted to answer my bond question in another topic, namely, if the bond bull is dead, does that mean a place like Italy, see below, is less risky to park your money?

I don't believe it. I think this is a blip and we'll be back lower soon enough.

Image


The Federal Reserve cannot allow the Treasury rate to rise significantly because that would send the "budget" into a death spiral.

So they will always choose to print more "money", even if that means hyperinflation.

Of course in the latter case bonds will be useful primarily to light cigars with.
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pugchief
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Re: Out of balance

Postby pugchief » Wed Jan 10, 2018 4:36 pm

Corto,

What does the last column "1 day" refer to?
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Tortoise
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Re: Out of balance

Postby Tortoise » Wed Jan 10, 2018 5:08 pm

If LTT rates rise gradually, then of course existing bond prices would fall, but wouldn't a bond ladder (say, 20-30 year maturities) benefit as the older bonds get rolled into new ones at the higher rate?

Those two effects counter each other, and I don't know which one would dominate. I'm guessing it depends on the rate, rate of increase in the rate, and how often bonds get rolled over in the ladder.

Would be interesting to run an analysis on different scenarios to see how quickly LTT rates would have to rise in order for an LTT ladder to take a big hit in overall return.
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Re: Out of balance

Postby dualstow » Wed Jan 10, 2018 5:38 pm

pugchief wrote:Corto,

What does the last column "1 day" refer to?


Change. in basis points?
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Cortopassi
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Re: Out of balance

Postby Cortopassi » Wed Jan 10, 2018 5:47 pm

dualstow wrote:
pugchief wrote:Corto,

What does the last column "1 day" refer to?


Change. in basis points?


Yes I believe so. Here is the link:

https://www.bloomberg.com/markets/rates-bonds
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Re: Out of balance

Postby dualstow » Fri Jan 12, 2018 10:32 am

for Don:

Mr. Edwards believes yields will push higher over time but not too much, because if they rose enough to hurt equity markets, fearful investors would scoop the bonds right back.

“There’s almost a natural cap on government bond yields,” he added


{
https://www.wsj.com/articles/asia-stock ... 1515723926
}
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ochotona
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Re: Out of balance

Postby ochotona » Wed Jan 17, 2018 4:41 pm

We're in a little equity melt-up here. If you are somewhat close to rebalancing, I'd take my stocks back to policy percentages soon, before the opportunity is lost. Be fearful when others are greedy, be greedy when others are fearful.

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