A Reasonably Efficient Market

Discussion of the Bond portion of the Permanent Portfolio

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Smith1776
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A Reasonably Efficient Market

Post by Smith1776 » Wed May 27, 2020 4:14 pm

I found something curious. A lot has been written about high-yield/junk bonds, and how they don't belong in a portfolio. The risks have not been properly compensated for, people will say. Be that as it may, the corporate bond market is nonetheless a competitive market, so we should see some reasonably efficient pricing.

A curious coincidence of numbers combined with a show of market efficiency. For the 41-year time period tested, the high-yield U.S. bond market and the U.S. total stock market have had exactly the same Sharpe ratio and Sortino ratio.



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mathjak107
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Re: A Reasonably Efficient Market

Post by mathjak107 » Wed May 27, 2020 4:50 pm

I like high yield ..at times of risk off it gets beaten up bad ..it can offer great value ....I bought fidelity high yield in march and it is up 25k already ....it is less volatile than equites are for the most part and sometimes beat equities returns ...I hold a 20% stake in high yield
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Smith1776
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Re: A Reasonably Efficient Market

Post by Smith1776 » Wed May 27, 2020 5:07 pm

mathjak107 wrote:
Wed May 27, 2020 4:50 pm
I like high yield ..at times of risk off it gets beaten up bad ..it can offer great value ....I bought fidelity high yield in march and it is up 25k already ....it is less volatile than equites are for the most part and sometimes beat equities returns ...I hold a 20% stake in high yield
I really enjoy having high-yield bonds as well. They are very fun to hold and I am finding the asset class to be a fascinating little research topic too!
25% KILO.B | 60% VCIP | 15% VVL/VMO/VVO/VLQ | 90 Days of Expenses Bank Cash | 5% of Net Worth Physical Gold & Silver Bullion
Knucklehead (noun): Someone who knows the expense ratio of everything but the value of nothing.
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Smith1776
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Re: A Reasonably Efficient Market

Post by Smith1776 » Wed May 27, 2020 5:17 pm

In theory we should be able to leverage up on the high-yield bond portfolio to the same level of volatility as TSM and get the same performance minus borrowing costs.

EDIT: COULD have levered up... no guarantee this coincidence of numbers will reoccur, of course.
25% KILO.B | 60% VCIP | 15% VVL/VMO/VVO/VLQ | 90 Days of Expenses Bank Cash | 5% of Net Worth Physical Gold & Silver Bullion
Knucklehead (noun): Someone who knows the expense ratio of everything but the value of nothing.
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