Buying and maintaining the LT bonds part of the PP

Discussion of the Bond portion of the Permanent Portfolio

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mathjak107
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Re: Buying and maintaining the LT bonds part of the PP

Post by mathjak107 » Sun Dec 15, 2019 3:44 am

senecaaa wrote:
Sun Dec 15, 2019 2:49 am
mathjak107 wrote:
Sat Dec 14, 2019 5:25 pm
The logic here is flawed about if rates go up ...selling a bond that lost value because rates went up and losing money is no different then selling a losing stock and buying something you think is better .... a loss is a loss and it does not come back ...you just. Hope what you buy next be it another bond or stock does better.

If I sell my Tlt at a loss it means it is because the yield on the fund is higher for new buyers ... if I sell at a loss or even have a loss and buy more Tlt yielding higher that loss stays put ....when you average down the percentage you are down changes but the dollars down stay the dollars down

Losses are never good ...because you buy more of something when it’s down does not make the loss go away .....we can only hope that what we buy or add that is new money goes up enough to offset some of the loss
The thing is that the managers of TLT also have to sell and buy to keep a steady duration. So they also need to sell at a loss sometimes. They just do it a bit at the time I guess instead of all of it after 10 years.

all you care about is the total return , not how the fund makes the sausage as they say . if that fund performs it's function in the model how the managers do it is up to them .

if rates rise you will see the same losses in a bond ladder as the fund .

after a while perfect becomes the enemy of "good " as you try to encompass every vision of some doom or catastrophe in your head . the end result is the plan gets to complex and to hard to deal with ...

a spouse who has no knowledge at all should be able to take the reins over without worrying about how to form bond ladders or when and how to buy bonds . even having gold stored off shore can be an obstacle to a spouse dealing with things ..


nothing beats simplicity and the more twists and turns and work required the greater the odds perfection will screw up good .

i don't think harry considered a spouse who has to take things over easily in a lot of his "perfection " ideas as he tried to cover all the doom and gloom he could think of . especially in those days when many assets were hard to deal with for someone with no clue .
Last edited by mathjak107 on Sun Dec 15, 2019 5:40 am, edited 2 times in total.
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Re: Buying and maintaining the LT bonds part of the PP

Post by senecaaa » Sun Dec 15, 2019 5:32 am

mathjak107 wrote:
Sun Dec 15, 2019 3:44 am
all you care about is the total return , not how the fund makes the sausage as they say . if that fund performs it's function in the model how the managers do it is up to them .

if rates rise you will see the same losses in a bond ladder as the fund .

after a while perfect becomes the enemy of "good " as you try to encompass every vision of some doom or catastrophe in your head . the end result is the plan gets to complex and to hard to deal with ...

a spouse who has no knowledge at all should be able to take the reins over without worrying about how to form bond ladders or when and how to buy bonds . even having gold stored off shore can be an obstacle to a spouse dealing with things ..


nothing beats simplicity and the more twists and turns and work required the greater the odds perfection will screw up good .
Yes, I agree with that. If I lived in the US I'd go with TLT :)

This is what comes closest in the EU: https://www.ishares.com/uk/individual/e ... -ucits-etf but has just a duration of 19 years.
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Re: Buying and maintaining the LT bonds part of the PP

Post by Tyler » Sun Dec 15, 2019 11:29 am

senecaaa wrote:
Sun Dec 15, 2019 5:32 am

Yes, I agree with that. If I lived in the US I'd go with TLT :)

This is what comes closest in the EU: https://www.ishares.com/uk/individual/e ... -ucits-etf but has just a duration of 19 years.
I think you might be confusing maturity and duration. E20Y has an average maturity of 25 years and a duration of 19 years. TLT has an average maturity of 25 years and a duration of 18 years. IMO, they're not just close. They're virtually identical funds for different markets.
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Re: Buying and maintaining the LT bonds part of the PP

Post by senecaaa » Sun Dec 15, 2019 2:42 pm

Tyler wrote:
Sun Dec 15, 2019 11:29 am
senecaaa wrote:
Sun Dec 15, 2019 5:32 am

Yes, I agree with that. If I lived in the US I'd go with TLT :)

This is what comes closest in the EU: https://www.ishares.com/uk/individual/e ... -ucits-etf but has just a duration of 19 years.
I think you might be confusing maturity and duration. E20Y has an average maturity of 25 years and a duration of 19 years. TLT has an average maturity of 25 years and a duration of 18 years. IMO, they're not just close. They're virtually identical funds for different markets.
Ah yes, you're right. For some reason, I thought TLT had a longer duration.
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Re: Buying and maintaining the LT bonds part of the PP

Post by Pet Hog » Sun Dec 15, 2019 11:55 pm

senecaaa wrote:
Sun Dec 15, 2019 2:49 am
mathjak107 wrote:
Sat Dec 14, 2019 5:25 pm
The logic here is flawed about if rates go up ...selling a bond that lost value because rates went up and losing money is no different then selling a losing stock and buying something you think is better .... a loss is a loss and it does not come back ...you just. Hope what you buy next be it another bond or stock does better.

If I sell my Tlt at a loss it means it is because the yield on the fund is higher for new buyers ... if I sell at a loss or even have a loss and buy more Tlt yielding higher that loss stays put ....when you average down the percentage you are down changes but the dollars down stay the dollars down

Losses are never good ...because you buy more of something when it’s down does not make the loss go away .....we can only hope that what we buy or add that is new money goes up enough to offset some of the loss
The thing is that the managers of TLT also have to sell and buy to keep a steady duration. So they also need to sell at a loss sometimes. They just do it a bit at the time I guess instead of all of it after 10 years.
With TLT you don't ever need to sell at a loss when running a PP. You would just rebalance/buy into the ETF. What I was talking about was the PP investor who holds LTTs directly and the maturity goes under 20 years. You might have to sell them at a loss and rebalance/buy new 30-years. I don't think it's flawed logic -- it's the philosophy of the PP!
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Re: Buying and maintaining the LT bonds part of the PP

Post by mathjak107 » Mon Dec 16, 2019 2:07 am

a loss is a loss ... sold or not it is what it is .. at any given point in time that is your value whether you choose to care or notis another story . we just hope by not selling that it's value may change but that is all it's worth . ..there is no such thing as a loss only on paper .

whether you are down and choose to stay in the same investment or sell and choose to let the money ride in a different investment is irrelevant , a loss in value is a loss in value
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Re: Buying and maintaining the LT bonds part of the PP

Post by vnatale » Fri Dec 20, 2019 9:08 pm

mathjak107 wrote:
Mon Dec 16, 2019 2:07 am
a loss is a loss ... sold or not it is what it is .. at any given point in time that is your value whether you choose to care or notis another story . we just hope by not selling that it's value may change but that is all it's worth . ..there is no such thing as a loss only on paper .

whether you are down and choose to stay in the same investment or sell and choose to let the money ride in a different investment is irrelevant , a loss in value is a loss in value
I have believed the same as you for over 25 years. Do you agree that each day that if you don't sell you are implicitly deciding to buy what you still own from the prior day?

The only practical difference between sold or not is any consequent tax ramifications from selling.

Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: Buying and maintaining the LT bonds part of the PP

Post by mathjak107 » Sat Dec 21, 2019 8:15 am

vnatale wrote:
Fri Dec 20, 2019 9:08 pm
mathjak107 wrote:
Mon Dec 16, 2019 2:07 am
a loss is a loss ... sold or not it is what it is .. at any given point in time that is your value whether you choose to care or notis another story . we just hope by not selling that it's value may change but that is all it's worth . ..there is no such thing as a loss only on paper .

whether you are down and choose to stay in the same investment or sell and choose to let the money ride in a different investment is irrelevant , a loss in value is a loss in value
I have believed the same as you for over 25 years. Do you agree that each day that if you don't sell you are implicitly deciding to buy what you still own from the prior day?

The only practical difference between sold or not is any consequent tax ramifications from selling.

Vinny
ABSOLUTELY . each day whether we are leaving the money in play overnight or selling out and buying in each morning , it is a new investment day going forward and it is all your money invested either way .

people make poor decisions because they think it is somehow different if they sell vs not sell .

no , except for taxes whether you attempt to ride the same investment back up or sell and ride another one back up is irrelevant except if taxes are involved. in both cases we hope our existing value goes up .
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