The Less Pretty Bond Thread

Discussion of the Bond portion of the Permanent Portfolio

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Xan
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Re: The Bond Dream Room

Post by Xan » Sat Sep 05, 2020 3:19 pm

modeljc wrote:
Sat Sep 05, 2020 3:10 pm
Xan wrote:
Wed Sep 02, 2020 8:47 pm
modeljc wrote:
Wed Sep 02, 2020 3:58 pm
Xan wrote:
Tue Sep 01, 2020 9:31 pm
That could be, Smith.

It could be (either instead or also?) that LTTs are bounded on both sides for a long time: they can't go up because the government wouldn't want high interest payments, and they can't go down because zero is a boundary of some kind.

If that's the case, and it's MediumTex's game of ping-pong for a while where small changes in yield result in outsized (but not too huge) changes in value, then I'm considering doing a frequent (daily? weekly?) rebalance between cash and LTTs. Every day (or whenever), make it so your cash and LTTs have the same value as each other. That would allow you to capture the gains from the range-bound volatility.
Thanks! I like the idea. I'm a little low on Cash and would love to add to it little by little. Let's do this weekly so how do you implement a plan. Can you give the board an example. Let's start with $100,000 in Cash and $100,000 in LTTs. If LTTs go down 2% for the week do you take cash and buy enought to equal your cash? Or do you only sell LTTs when they are above your cash level. I'm a little fuzzy pls. help.
I'm not actually doing it; it's just an idea I've kicked around a little.

You could do it any which way, but the way I envision, each week (or whenever), you would buy or sell enough LTTs such that your cash and LTTs were the same as each other. Then normal "rebalance everything" rules would apply if stocks or gold (or I suppose both cash and LTT at the same time) hit a normal rebalancing band.

Of course this would not be very tax-friendly: the gains would be short-term gains. That's better than no gains, of course. Before doing it, I'd want to do some more modeling on what happens if I'm wrong, and LTTs either go way up or way down rather than being range-bound.
I did a six month, weekly paper trade starting with $100,000 in Cash and $100,000 in TLT. I did not change if the week did not produce at least 1%. Lots of price change ranging from 1.0% to 7.3% per week. 42.7% total up or down. But I did not make but $176 or .17% over buy and hold. The shares in TLT went down from 686 to 643 or -6.3%. Started Sept 2, 2019 to Feb 28, 2020. This seemed to hold a lot of promise for a tax free account and pick up a lot of action if TLT is range bound. It seems the number of shares involved are to small to make much difference. Buying or selling between 1.47 shares and 11.46 shares. Any ideas to cpature more Dollar action?
Very informative, thanks!

What if instead of doing the mini-rebalance (that is, the cash/bonds rebalance) weekly, you check weekly, and only execute if they're out of proportion by some amount. A rebalancing band for this mini-rebalance, if you will.
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Re: The Bond Dream Room

Post by modeljc » Sat Sep 05, 2020 6:35 pm

Xan wrote:
Sat Sep 05, 2020 3:19 pm
modeljc wrote:
Sat Sep 05, 2020 3:10 pm
Xan wrote:
Wed Sep 02, 2020 8:47 pm
modeljc wrote:
Wed Sep 02, 2020 3:58 pm
Xan wrote:
Tue Sep 01, 2020 9:31 pm
That could be, Smith.

It could be (either instead or also?) that LTTs are bounded on both sides for a long time: they can't go up because the government wouldn't want high interest payments, and they can't go down because zero is a boundary of some kind.

If that's the case, and it's MediumTex's game of ping-pong for a while where small changes in yield result in outsized (but not too huge) changes in value, then I'm considering doing a frequent (daily? weekly?) rebalance between cash and LTTs. Every day (or whenever), make it so your cash and LTTs have the same value as each other. That would allow you to capture the gains from the range-bound volatility.
Thanks! I like the idea. I'm a little low on Cash and would love to add to it little by little. Let's do this weekly so how do you implement a plan. Can you give the board an example. Let's start with $100,000 in Cash and $100,000 in LTTs. If LTTs go down 2% for the week do you take cash and buy enought to equal your cash? Or do you only sell LTTs when they are above your cash level. I'm a little fuzzy pls. help.
I'm not actually doing it; it's just an idea I've kicked around a little.

You could do it any which way, but the way I envision, each week (or whenever), you would buy or sell enough LTTs such that your cash and LTTs were the same as each other. Then normal "rebalance everything" rules would apply if stocks or gold (or I suppose both cash and LTT at the same time) hit a normal rebalancing band.

Of course this would not be very tax-friendly: the gains would be short-term gains. That's better than no gains, of course. Before doing it, I'd want to do some more modeling on what happens if I'm wrong, and LTTs either go way up or way down rather than being range-bound.
I did a six month, weekly paper trade starting with $100,000 in Cash and $100,000 in TLT. I did not change if the week did not produce at least 1%. Lots of price change ranging from 1.0% to 7.3% per week. 42.7% total up or down. But I did not make but $176 or .17% over buy and hold. The shares in TLT went down from 686 to 643 or -6.3%. Started Sept 2, 2019 to Feb 28, 2020. This seemed to hold a lot of promise for a tax free account and pick up a lot of action if TLT is range bound. It seems the number of shares involved are to small to make much difference. Buying or selling between 1.47 shares and 11.46 shares. Any ideas to cpature more Dollar action?
Very informative, thanks!

What if instead of doing the mini-rebalance (that is, the cash/bonds rebalance) weekly, you check weekly, and only execute if they're out of proportion by some amount. A rebalancing band for this mini-rebalance, if you will.
There were 8weeks that did not change 1.0% so I did nothing until the next week. The changes per week averaged 2.5% and there was 17 trades. The money invoved ranged $505 to $3815. To small to move the needle. Even if you play like you do 20 times more than the signals I don't think you can make this work. But I like this concept. Wish I could program this so the work would be quicker. I may have some errors at age 83! Thanks as I have been thinking along the same lines. 25% waiting for a buy oppuntornity and 25% in a ping- pong game. 50% that may be bounded for 5+ years or more.
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Re: The Bond Dream Room

Post by boglerdude » Mon Oct 26, 2020 6:07 am

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Re: The Bond Dream Room

Post by Kbg » Mon Oct 26, 2020 8:51 pm

Maybe we should fork this thread and open a new Bond Scream Room thread...seems more applicable now, dontcha think?
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Re: The Bond Dream Room

Post by dualstow » Tue Oct 27, 2020 7:34 am

Kbg wrote:
Mon Oct 26, 2020 8:51 pm
Maybe we should fork this thread and open a new Bond Scream Room thread...seems more applicable now, dontcha think?
Not a bad idea. Maybe it should have a title so close to the original.
How far back to you want to go for the fork?
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Re: The Bond Dream Room

Post by Kbg » Tue Oct 27, 2020 5:15 pm

Probably around the point we started talking about this latest cut to ZIRP almost.
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Re: The Bond Dream Room

Post by dualstow » Tue Oct 27, 2020 5:40 pm

Kbg wrote:
Tue Oct 27, 2020 5:15 pm
Probably around the point we started talking about this latest cut to ZIRP almost.
Do you have an an approximate date or better yet, a page number and a few words from a post? I’m feeding the cat and juggling a few domestic issues.
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Re: The Bond Dream Room

Post by Kbg » Wed Oct 28, 2020 8:29 am

Pg 46
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Re: The Less Pretty Bond Thread

Post by dualstow » Wed Oct 28, 2020 11:45 am

Kbg wrote:
Wed Oct 28, 2020 8:29 am
Pg 46
Ok, this thread was born from The Bond Dream Room, starting at what was its 46th page.
Thanks for the suggestion, kbg.

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Re: The Less Pretty Bond Thread

Post by mathjak107 » Fri Oct 30, 2020 3:03 pm

Phew ,even when stocks take a beating , bonds have been taking it on the chin .both ltpz and tlt have been getting beat up ..
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Re: The Less Pretty Bond Thread

Post by Ad Orientem » Fri Oct 30, 2020 4:05 pm

Sometimes in the short term cash is your only safe haven. I try not to obsess about near term movements, but I do tend to agree that in the longer term bonds have probably topped out. Most investors are going to be leery of buying fixed income securities yielding next to nothing when the Fed is openly declaiming that it wants to spark inflation. I expect that stocks and gold will be the strong performers in the PP for the intermediate term future. These short term movements are best ignored.
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Re: The Less Pretty Bond Thread

Post by mathjak107 » Fri Oct 30, 2020 4:10 pm

While I trade the bond portion of the pp right now I am split between Tlt and ltpz

And on the shorter end I split vtip and cash .

I have dbc riding herd as commodities have been marching to their own drum lately
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