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Re: Does it make sense to buy long bonds now?

Posted: Fri Sep 11, 2020 1:02 pm
by Tortoise
mathjak107 wrote:
Fri Sep 11, 2020 7:31 am
interest rate sensitivity is very low now ... stocks sill in the 25% range. beta runs 1/3 the volatility of the s&p 500
Can you provide a source for your beta calculation?

I looked it up just now, and according to Yahoo Finance, the betas for SPY and TLT are 1.00 and 3.03, respectively. Doesn't that mean TLT's beta is 3x (not 1/3) that of SPY? (I'll admit I know very little about beta. So just let me know if I misunderstood something.)

Re: Does it make sense to buy long bonds now?

Posted: Fri Sep 11, 2020 1:25 pm
by mathjak107
Tortoise wrote:
Fri Sep 11, 2020 1:02 pm
mathjak107 wrote:
Fri Sep 11, 2020 7:31 am
interest rate sensitivity is very low now ... stocks sill in the 25% range. beta runs 1/3 the volatility of the s&p 500
Can you provide a source for your beta calculation?

I looked it up just now, and according to Yahoo Finance, the betas for SPY and TLT are 1.00 and 3.03, respectively. Doesn't that mean TLT's beta is 3x (not 1/3) that of SPY? (I'll admit I know very little about beta. So just let me know if I misunderstood something.)
morningstar has all the betas on the various funds.

in the case of this portfolio , it is a portfolio i have used for a long time from the fidelity insight newsletter and they calculate it daily .

Re: Does it make sense to buy long bonds now?

Posted: Fri Sep 11, 2020 1:31 pm
by mathjak107
mathjak107 wrote:
Fri Sep 11, 2020 1:25 pm
Tortoise wrote:
Fri Sep 11, 2020 1:02 pm
mathjak107 wrote:
Fri Sep 11, 2020 7:31 am
interest rate sensitivity is very low now ... stocks sill in the 25% range. beta runs 1/3 the volatility of the s&p 500
Can you provide a source for your beta calculation?

I looked it up just now, and according to Yahoo Finance, the betas for SPY and TLT are 1.00 and 3.03, respectively. Doesn't that mean TLT's beta is 3x (not 1/3) that of SPY? (I'll admit I know very little about beta. So just let me know if I misunderstood something.)
morningstar has all the betas on the various funds.

in the case of this portfolio , it is a portfolio i have used for a long time from the fidelity insight newsletter and they calculate it daily .
i can't disclose the current models but this is an old example ...... so nobody use it as the models are different today ......

i have used them since 1987 and used the growth model for decades in my accumulation stage . in retirement i use the income model ... if we have a nice drop i will put money in the more aggressive models but not at the point we are in now

Image

Re: Does it make sense to buy long bonds now?

Posted: Fri Sep 11, 2020 1:45 pm
by Tortoise
mathjak107 wrote:
Fri Sep 11, 2020 1:25 pm
morningstar has all the betas on the various funds.

in the case of this portfolio , it is a portfolio i have used for a long time from the fidelity insight newsletter and they calculate it daily .
It sounds like we're talking about different things here. I'm talking about LTTs (e.g., TLT), but you are talking about some kind of portfolio.

When you said, "interest rate sensitivity is very low now ... stocks sill in the 25% range. beta runs 1/3 the volatility of the s&p 500", I thought you were saying that LTTs aren't nearly as volatile as stocks (S&P 500) right now. But as I pointed out, the beta of TLT is 3x that of SPY, implying that LTTs are currently much more volatile than stocks.

Re: Does it make sense to buy long bonds now?

Posted: Fri Sep 11, 2020 2:18 pm
by mathjak107
Tortoise wrote:
Fri Sep 11, 2020 1:45 pm
mathjak107 wrote:
Fri Sep 11, 2020 1:25 pm
morningstar has all the betas on the various funds.

in the case of this portfolio , it is a portfolio i have used for a long time from the fidelity insight newsletter and they calculate it daily .
It sounds like we're talking about different things here. I'm talking about LTTs (e.g., TLT), but you are talking about some kind of portfolio.

When you said, "interest rate sensitivity is very low now ... stocks sill in the 25% range. beta runs 1/3 the volatility of the s&p 500", I thought you were saying that LTTs aren't nearly as volatile as stocks (S&P 500) right now. But as I pointed out, the beta of TLT is 3x that of SPY, implying that LTTs are currently much more volatile than stocks.
no , i sold all long term bonds the other day ... instead i am using the insight portfolio and keeping the gold from the pp.... so i own a different bond component and the same 25% in equities and same 25% in gold and 25% in cash proxies .

to much risk in TLT at this stage for my taste

Re: Does it make sense to buy long bonds now?

Posted: Sat Sep 12, 2020 1:12 pm
by johnnywitt
Hal wrote:
Fri Sep 11, 2020 7:26 am
europeanwizard wrote:
Fri Sep 11, 2020 6:16 am
boglerdude wrote:
Thu Sep 10, 2020 11:54 pm
What have investors been doing in germany
We're confused and don't know what to do:
viewtopic.php?f=3&t=10957
viewtopic.php?t=9082
viewtopic.php?f=1&t=9770&p=172861#p172861

As a European, I'm on the verge of dumping my bonds and thus leaving the Permanent Portfolio. But I don't know what else to do, except stay in cash. And I don't mean cash in the sense of a money market funds, that ship has long since sailed.
My pennies worth.....

If you are going to leave the PP, then
1. Watch: https://www.youtube.com/watch?v=a4_U6bS-cU4
2. Read: https://edelweissjournal.com
3. Consider a portfolio like this: https://www.youtube.com/watch?v=E0GQ1Gx8YCw

I am actually running a variable portfolio similar to this. So far so good ???
Hal, thanks so much for the Links. I was aware of the Anthony Dedan interview on RV and had watched it when it came out last year, but I was unaware of Edelweiss & Belangp.
So, are you still running a PP for your core portfolio and only running the Belangp Portfolio in your VP?

Again, thanks for the Links.

Re: Does it make sense to buy long bonds now?

Posted: Thu Sep 17, 2020 2:16 pm
by amdda01
no , i sold all long term bonds the other day ... instead i am using the insight portfolio and keeping the gold from the pp.... so i own a different bond component and the same 25% in equities and same 25% in gold and 25% in cash proxies .

to much risk in TLT at this stage for my taste
MJ,

Just curious - What would it take to bring ya back to TLT?

Re: Does it make sense to buy long bonds now?

Posted: Thu Sep 17, 2020 5:14 pm
by mathjak107
at least 2 to 2-1/2% in rates and even then I need to evaluate..it was a 40 year drop to get here ....the return trip back up may not stop for quite a long time .

Re: Does it make sense to buy long bonds now?

Posted: Tue Oct 13, 2020 9:41 am
by doodle
mathjak107 wrote:
Thu Sep 17, 2020 5:14 pm
at least 2 to 2-1/2% in rates and even then I need to evaluate..it was a 40 year drop to get here ....the return trip back up may not stop for quite a long time .
I don't see how we get back to higher rates at all considering the amount of debt in system and the way asset prices are tied to low rates. A reversal especially a quick one would be brutal and politically unconscionable. After all, everything is on government life support these days. There is no free market.

Re: Does it make sense to buy long bonds now?

Posted: Tue Oct 13, 2020 9:44 am
by mathjak107
doodle wrote:
Tue Oct 13, 2020 9:41 am
mathjak107 wrote:
Thu Sep 17, 2020 5:14 pm
at least 2 to 2-1/2% in rates and even then I need to evaluate..it was a 40 year drop to get here ....the return trip back up may not stop for quite a long time .
I don't see how we get back to higher rates at all considering the amount of debt in system and the way asset prices are tied to low rates. A reversal especially a quick one would be brutal and politically unconscionable. After all, everything is on government life support these days. There is no free market.
bond investors will want more yield to take the risk with bonds ..at the end of the day it is the worlds bond investors that decide what is proper compensation.

there is little compelling argument when yields are 1.50% going out 30 years and the fed says their target is 2-3% inflation .

Re: Does it make sense to buy long bonds now?

Posted: Tue Oct 13, 2020 10:00 am
by doodle
mathjak107 wrote:
Tue Oct 13, 2020 9:44 am
doodle wrote:
Tue Oct 13, 2020 9:41 am
mathjak107 wrote:
Thu Sep 17, 2020 5:14 pm
at least 2 to 2-1/2% in rates and even then I need to evaluate..it was a 40 year drop to get here ....the return trip back up may not stop for quite a long time .
I don't see how we get back to higher rates at all considering the amount of debt in system and the way asset prices are tied to low rates. A reversal especially a quick one would be brutal and politically unconscionable. After all, everything is on government life support these days. There is no free market.
bond investors will want more yield to take the risk with bonds ..at the end of the day it is the worlds bond investors that decide what is proper compensation.

there is little compelling argument when yields are 1.50% going out 30 years and the fed says their target is 2-3% inflation .
Is it? Or does the Fed control rates? There is some debate to how much influence they can exert on long end of curve but the do have the ability theoretically to ensure auctions never fail.

Europe and Japan are negative now. Why not us next?

Re: Does it make sense to buy long bonds now?

Posted: Tue Oct 13, 2020 10:03 am
by doodle
To me it seems we are employing this same stupid policy.

https://www.investopedia.com/articles ... japan.asp

Re: Does it make sense to buy long bonds now?

Posted: Tue Oct 13, 2020 10:08 am
by mathjak107
doodle wrote:
Tue Oct 13, 2020 10:00 am
mathjak107 wrote:
Tue Oct 13, 2020 9:44 am
doodle wrote:
Tue Oct 13, 2020 9:41 am
mathjak107 wrote:
Thu Sep 17, 2020 5:14 pm
at least 2 to 2-1/2% in rates and even then I need to evaluate..it was a 40 year drop to get here ....the return trip back up may not stop for quite a long time .
I don't see how we get back to higher rates at all considering the amount of debt in system and the way asset prices are tied to low rates. A reversal especially a quick one would be brutal and politically unconscionable. After all, everything is on government life support these days. There is no free market.
bond investors will want more yield to take the risk with bonds ..at the end of the day it is the worlds bond investors that decide what is proper compensation.

there is little compelling argument when yields are 1.50% going out 30 years and the fed says their target is 2-3% inflation .
Is it? Or does the Fed control rates? There is some debate to how much influence they can exert on long end of curve but the do have the ability theoretically to ensure auctions never fail.

Europe and Japan are negative now. Why not us next?

the inverted yield curves happen when the bond investors disagree with what the fed is doing . so it is the bond investors in the drivers seat ..the fed may do a bit of influencing if it can but if bond investors want more they will get more.

if the world bond investors drive up rates the fed could have a very hard time stopping that .

we are very different then japan or europe . they use negative rates to force banks to make loans . babnks in europe and japan do not do what banks here do ...... they shy away from lots of deals unlike our banks .

our banks have no problems when it comes to making loans ...the negative rates act as a tax on money not loaned out by banks in europe and japan ....

Re: Does it make sense to buy long bonds now?

Posted: Tue Oct 13, 2020 10:10 am
by doodle
Negative interest rates seem like governments and central banks policy attempt to push the fairy tale idea of eternal economic growth. As long as that myth persists then I don't see impetus for any change in policy.

Re: Does it make sense to buy long bonds now?

Posted: Tue Oct 13, 2020 10:12 am
by mathjak107
see my comment above about why we will likely never go negative here more than 1/2 point or so if at all

Re: Does it make sense to buy long bonds now?

Posted: Tue Oct 13, 2020 10:13 am
by doodle
Why have bond investors not revolted in Japan and Europe then? Why have central banks been able to take rates negative there? Why would US be unique?

Re: Does it make sense to buy long bonds now?

Posted: Tue Oct 13, 2020 10:40 am
by Kriegsspiel
Because they had the US, but if the US rates go negative, there's nowhere else to turn?

Re: Does it make sense to buy long bonds now?

Posted: Tue Oct 13, 2020 12:30 pm
by mathjak107
exactly ... they don't have to invest in their own country

Re: Does it make sense to buy long bonds now?

Posted: Tue Oct 13, 2020 2:46 pm
by doodle
mathjak107 wrote:
Tue Oct 13, 2020 12:30 pm
exactly ... they don't have to invest in their own country
I don't understand...who is holding japanese and european bonds then? Is it all being held by the central banks?

Re: Does it make sense to buy long bonds now?

Posted: Tue Oct 13, 2020 3:58 pm
by mathjak107
doodle wrote:
Tue Oct 13, 2020 2:46 pm
mathjak107 wrote:
Tue Oct 13, 2020 12:30 pm
exactly ... they don't have to invest in their own country
I don't understand...who is holding japanese and european bonds then? Is it all being held by the central banks?
It depends on the relationship to other countries currencies ....many 3rd world countries need a safe country to hold their country’s assets and they don’t mind paying a bit to store it in bonds outside their borders

Re: Does it make sense to buy long bonds now?

Posted: Tue Oct 13, 2020 6:23 pm
by doodle
But less than 15 percent of japanese bonds are held by foreign investors....haven't looked up Europe but wouldn't be surprised if similar. Doesn't seem like third world plutocrats are holding up these markets.

Re: Does it make sense to buy long bonds now?

Posted: Wed Oct 14, 2020 3:03 am
by mathjak107
interesting article today as to why china is buying more and more Japanese bonds .



https://www.cnbc.com/2020/10/14/why-chi ... bonds.html

Re: Does it make sense to buy long bonds now?

Posted: Wed Oct 14, 2020 3:55 am
by boglerdude
The practice of a currency swap is when two parties exchange an equivalent amount of money with each other in different currencies, in order to protect themselves from further exposure to exchange rate risk, for instance.

“Many reserve managers buy JGBs and then swap or hedge the currency back into dollars, earning an additional ‘basis’ premium”

eli5?

Re: Does it make sense to buy long bonds now?

Posted: Wed Oct 14, 2020 11:11 am
by ahhrunforthehills
doodle wrote:
Tue Oct 13, 2020 10:00 am
mathjak107 wrote:
Tue Oct 13, 2020 9:44 am
doodle wrote:
Tue Oct 13, 2020 9:41 am
mathjak107 wrote:
Thu Sep 17, 2020 5:14 pm
at least 2 to 2-1/2% in rates and even then I need to evaluate..it was a 40 year drop to get here ....the return trip back up may not stop for quite a long time .
I don't see how we get back to higher rates at all considering the amount of debt in system and the way asset prices are tied to low rates. A reversal especially a quick one would be brutal and politically unconscionable. After all, everything is on government life support these days. There is no free market.
bond investors will want more yield to take the risk with bonds ..at the end of the day it is the worlds bond investors that decide what is proper compensation.

there is little compelling argument when yields are 1.50% going out 30 years and the fed says their target is 2-3% inflation .
Is it? Or does the Fed control rates? There is some debate to how much influence they can exert on long end of curve but the do have the ability theoretically to ensure auctions never fail.

Europe and Japan are negative now. Why not us next?
FYI, this was touched on last month in the thread "Re: Bonds and the PP -- still make sense?":

"Going negative on rates basically fines the banks for not loaning money. The banks simply pass those costs onto its customers. From my understanding, that is a large reason why governments view this approach as destructive instead of helpful. There is also the negative impact it has on pensions, savers, and the elderly. Again, not very helpful.

Keep in mind that, again, the countries that have negative rates have had different objectives than we would. USD exports are only like 12% of GDP, so trying to have a more competitive exchange rate would have a lot less of an impact than it would for those other countries (not to mention it didn’t even appear to really help them that much)."

viewtopic.php?f=1&t=11022&start=24#p205568

Re: Does it make sense to buy long bonds now?

Posted: Wed Oct 14, 2020 11:24 pm
by doodle
There is some argument to be made that negative rates are actually deflationary instead of stimulative in that they rob so many of interest income. I know I am getting screwed by these rates. In a normal interest rate environment I'd be fully retired by now...need about 3 times what I planned would be enough because of these low rates. So much for plans.