Staying the course with LTTs

Discussion of the Bond portion of the Permanent Portfolio

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mathjak107
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Re: Staying the course with LTTs

Post by mathjak107 » Tue Nov 02, 2021 5:25 pm

Well it took 40 years to get here so get back in 20-30 years lol.

It is pretty unlikely buying a 30 year bond at 2% will be looked at as a missed opportunity unless we have a depression..

It all depends what it is being compared to as an opportunity .

Wasting time in 30 year 2% bonds at the expense of missing an opportunity in a better performing asset class can be a far worse missed opportunity if it blew away those 2% bonds..

It isn’t as much a case of the 2% bonds being a buying opportunity in 6% inflation as it is they just may be a safer place to hide if other assets crap the bed…..

It should be interesting to see what long treasuries do with the fed tapering.. so far we have two interest rate hikes priced in on the short end
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Re: Staying the course with LTTs

Post by seajay » Tue Nov 02, 2021 5:44 pm

murphy_p_t wrote:
Sun Oct 31, 2021 5:00 pm
That talmudic suggestion ( third's metal, stocks, cash) I've seen in somebody's signature looks pretty sensible to me at the moment, as a general principle.
foglifter's sig indicates land/business/reserves - one interpretation of the Talmud advise, however a variant of the translation could be interpreted as a third being buried in land i.e. gold, a third commerce (stocks) and a third in reserves (cash deposits). The context was in respect to protecting ones wealth. Compares reasonably to the PP since 1972. In most years either stock or gold will do OK and might be top-sliced to source income, in years when neither stock or gold do OK then you have the cash reserves to fall back upon. Much like Old Money that might hold art and gold along with some cash and then sell a art piece or some gold, whichever is the most up to top up cash as/when that's depleted.
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Re: Staying the course with LTTs

Post by mathjak107 » Wed Nov 03, 2021 3:16 am

America will likely never see negative rates on bonds ..we don’t need to .

Europe needed them because the banks don’t loan freely so they needed a penalty for not loaning money ..American banks are way way different and loan easily and negative rates are not needed on bonds
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Re: Staying the course with LTTs

Post by pp4me » Wed Nov 03, 2021 10:08 am

The directly purchased bonds I'm holding in my IRA have served me well over time - still up about 20% overall at this point. I seem to recall at least one year when they were the winning asset. Also like seeing coupon payments twice a year.

So I've grown kind of fond of them and don't intend to desert then any time soon.
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Re: Staying the course with LTTs

Post by Jack Jones » Wed Nov 03, 2021 12:49 pm

I don't like them, but I don't understand them well enough to drop them from the portfolio. I have 20% allocated to LTTs. As a side note, I do believe rates can go significantly lower.
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Re: Staying the course with LTTs

Post by Kriegsspiel » Wed Nov 03, 2021 1:03 pm

I'm not willing to bet that rates will go up. I'm hoping that if they do, the other assets pick up the slack and the overall portfolio stays around the 3-5% real return range. I still accept that they could bounce around where they are now for a while.

I still have LTTs, but I have less than 25% currently. I'm around 17% (not rolling over bonds that hit 10 years), so my overall barbell duration is pretty close to the ITT fund right now.
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Re: Staying the course with LTTs

Post by I Shrugged » Wed Nov 03, 2021 1:33 pm

We've had all of our liquid assets in the PP for 18 years. Prior to that I was a standard Boglehead type. The first 6 years were a lazy approximation using non treasuries, and a precious metals mining fund. (2008-09 showed both of those to be big mistakes.) From 2009 on, it's been a pretty sound PP including Treasuries and gold. I'm very pleased with our performance over those 18 years.

Over 18 years, I've learned:
-There is always an asset that you wring your hands about. Often more than one.
-I'm better off not trying to time markets. Your mileage may vary.
-There is always someone to tell you how the PP is trash, yeah it worked okay in the past but this time is different, their portfolio is trouncing it, and implying you are a fool. Just look at these backtests!
-But so far, all of the alarmism has been for nothing. I don't sweat it.

Hey, we are in strange territory. No doubt about that. I'm mentally prepared to drop 20-25% in the next "event", because I think it is going to be a big one. If I knew what was going to happen, I would do something about it. But I don't, and I like the PP going forward. Even with super high priced stocks and bonds, worthless cash, and the barbarous relic.
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Re: Staying the course with LTTs

Post by seajay » Wed Nov 03, 2021 3:55 pm

20 year treasury reflect what the market opines will be the average over the next 20 years. Could see a situation where short dated spike to 6% yields in reflection of higher inflation, but where more broadly the market anticipates a 3% 20 year average. A increase from 2% present day 20 year treasury yields to 3% equates to a -15% price decline.

If/when that occurs I suspect many might step back and say "oh, I suspected long dated treasuries to lose so much more". Furthermore in part compensated by your short dated holdings rising from near 0% to 6% yields, a combined -13% and +6% = -3.5% loss against half of your assets (STT and LTT), a -1.75% PP hit. Noise.

If over 20 years inflation is expected to average 6%, well above Fed remit target 2% rates, then only then might LTT yields rise to 6% and see -46% type losses (again in part offset by higher regular income streams). A more significant -10% PP type hit, but potentially offset by the other assets.

Much of the fear of holding LTT's is perhaps overstated.
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Re: Staying the course with LTTs

Post by Vil » Wed Nov 03, 2021 3:57 pm

I Shrugged wrote:
Wed Nov 03, 2021 1:33 pm
But I don't, and I like the PP going forward. Even with super high priced stocks and bonds, worthless cash, and the barbarous relic.
Amen, brother. Oddly enough I have a bit more time than usual and just finished "The simple path to wealth". I guess the author is member of some radical right wing of the Boggleheads movement, as he proposes using 100% VTSAX for investors in all ages. Only once you get very close to retirement you can put a bit in VBTLX .... and some pretty 5% of cash. Nice, eh?
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Re: Staying the course with LTTs

Post by johnnywitt » Wed Nov 03, 2021 4:38 pm

mathjak107 wrote:
Sun Oct 31, 2021 8:21 am
People collecting social security just got a 6% increase in what they get because inflation is so high ….it is the highest increase in decades .

Zero on cash instruments, 1.6% on the ten year and 2% on the 30 year says things are not reflecting inflation by a lot …

The commodities market is soaring too ..my dbc commodity fund is up 68% over the one year and 48% ytd ..

So you have conflicting markets looking out at what is going on
Ok, so we assume that you are hypothetically 100% right and we have a '70's style rip roaring inflation. Your PP, or other PP variant, e.g. Jacob Fugger or GB Portfolios will fare well, but particularly the PP which has an innate bias toward inflation, according to people that are way more intelligent than I.
For me, the place to speculate and go all "Dominic Frisby" is in my VP. which is currently packed with 30yr Zero's, Oil & Big Tobacco and a small short.
Otherwise, I don't bet, or speculate with my Core Retirement IRA Portfolio.
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Re: Staying the course with LTTs

Post by mathjak107 » Wed Nov 03, 2021 5:03 pm

But you are betting heavy on rates as long term treasuries, short term treasuries and gold are all rate sensitive. Don’t think you are not making a bet here
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Re: Staying the course with LTTs

Post by mathjak107 » Wed Nov 03, 2021 5:12 pm

because you bet equal amounts of money , on outcomes that are anything but Equal at playing out you are making heavier bets in some places and less of a bet in others.

Plus it seems long term bonds and gold are joined at the hip as rates rise.
so far there are some pretty heavy bets made in the pp on rates.

My 25% equity model that uses short term treasuries , and intermediate term bonds is up 5% ytd
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Re: Staying the course with LTTs

Post by mathjak107 » Wed Nov 03, 2021 6:21 pm

2/3s of the time equities is the lead horse ..

Chance of depression 5%


Hyper inflation about 5%



I would say about 10% recession

About 13% rising rates and moderate inflation
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Re: Staying the course with LTTs

Post by dualstow » Wed Nov 03, 2021 8:24 pm

I Shrugged wrote:
Wed Nov 03, 2021 1:33 pm
We've had all of our liquid assets in the PP for 18 years.
That’s a long time! Every time stocks melt up I think, this would be a great time to just diversify into the pp.
And I have never been able to do wit. Not with all my assets.
vincent_c wrote:
Wed Nov 03, 2021 5:10 pm
No, if your default position is 4x25% then any deviation from that requires a bet.

Now if you want to argue the PP is not agnostic then we can do that.
I’ve had this whole conversation with mathjak. O0 The whole idea of the pp is that it’s not a bet, but whatever.
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Re: Staying the course with LTTs

Post by boglerdude » Thu Nov 04, 2021 12:49 am

If stocks only swing 40% and there was an ultra-long bond with 70% volatility, would you want the same $ amount in each asset
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Re: Staying the course with LTTs

Post by mathjak107 » Thu Nov 04, 2021 1:50 am

The biggest factor though is not how I think economic events can play out . It is how the fed wants them to play out .

Ding ding ding , the fed wants higher rates …..

Just like when the fed did everything but drop leaflets from helicopters saying don’t count on cash instruments, they are now saying don’t make big interest rate bets , we want higher rates .

That puts the odds of long term bonds doing well at very small odds in my worthless opinion .

I think long term bonds are going to be so far behind that It will take many years of interest to get back to just whole again which means back to the rate level they were the day you bought not current rates.

So yeah , fighting the fed is a bet with very low odds of playing out …especially when the fed does not want negative interest rates and rates are near bottom.

Over this year alone Tlt lost the Next 4 years in interest as of right now being down almost 8% . Gld is down about the same so they are moving together carrying a lot of weight , especially when shy is down too …..so 3 out of the 4 assets are tied heavily to rates and may be trying to fight the fed.

If that isn’t a big bet on rates I got a bridge to sell ya
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Re: Staying the course with LTTs

Post by dualstow » Thu Nov 04, 2021 6:39 am

mathjak, I noticed that in two weeks or less you’ve gone from “I’m not holding a pp at all so I don’t post anymore” to responding to each and every new thread, and on to, the pp is a risky bet in the wrong direction.

Is it time to resurrect mathjak’s daytrading thread?
Or maybe just a tongue-in-cheek ‘mathjak’s pp heresy’?
Something so that every permanent portfolio related thread doesn’t end in posts about why it’s a risky bet or just plain wrong?
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Re: Staying the course with LTTs

Post by mathjak107 » Thu Nov 04, 2021 8:09 am

I only respond to the posts that involve comments on the asset classes themselves whether used with the pp or not .

Or to correct what I think is just a mis belief .

If someone asks about long treasuries then I am am going to answer them . If someone claims the pp is not a bet on a particular outcome then I think that is a mis belief at this point as it sure as heck is heavily betting on the direction of rates today and is tied right in to the question about long treasury bonds
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Re: Staying the course with LTTs

Post by dockinGA » Thu Nov 04, 2021 8:29 am

dualstow wrote:
Thu Nov 04, 2021 6:39 am
mathjak, I noticed that in two weeks or less you’ve gone from “I’m not holding a pp at all so I don’t post anymore” to responding to each and every new thread, and on to, the pp is a risky bet in the wrong direction.

Is it time to resurrect mathjak’s daytrading thread?
Or maybe just a tongue-in-cheek ‘mathjak’s pp heresy’?
Something so that every permanent portfolio related thread doesn’t end in posts about why it’s a risky bet or just plain wrong?
It's about time to resurrect the 'how do I block someone's comments' post from 9 months or so ago.
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Re: Staying the course with LTTs

Post by mathjak107 » Thu Nov 04, 2021 8:30 am

It’s easy . Just ignore my posts if facts bother you.

Exactly how i stated it last year is how this year played out.

Not that I can predict , but if you simply looked at the big picture you knew the inflation monster was popping his head up and things were not going to be good for assets sensitive to moderate inflation and rising rates and the pp certainly falls in that camp .

I am not saying to switch portfolios.. but by the same token you shouldn’t bury your head in the sand and just discount facts either …or make claims that no longer seem to apply and to claim the pp is not a bet on a particular outcome like low rates is doing just that.
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Re: Staying the course with LTTs

Post by dualstow » Thu Nov 04, 2021 11:16 am

mathjak107 wrote:
Thu Nov 04, 2021 8:30 am
It’s easy . Just ignore my posts if facts bother you.
yes and no.
I think you often have valuable insights and obviously a lifetime of experience.
But, Just as bogleheads limited Craig’s pp posts to a thread or two on that forum, I don’t think your pp-is-a-risky-bet posts should muddy up every thread, unless it’s in the VP or Other section.

Sure, experienced membeers can hit the ignore button, but newcomers could potentially be confused, or turned off.
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Re: Staying the course with LTTs

Post by Kriegsspiel » Thu Nov 04, 2021 4:42 pm

Kriegsspiel wrote:
Wed Nov 03, 2021 1:03 pm
I'm not willing to bet that rates will go up. I'm hoping that if they do, the other assets pick up the slack and the overall portfolio stays around the 3-5% real return range.
I didn't look into whether these are real returns in the S&P 500 column, but I think the chart shows that the PP could be fine. Ben only looks at stocks, but a quick glance shows that gold does good too (and your cash gets quickly reinvested at higher rates).

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Re: Staying the course with LTTs

Post by vnatale » Thu Nov 04, 2021 5:39 pm

dualstow wrote:
Thu Nov 04, 2021 11:16 am

mathjak107 wrote:
Thu Nov 04, 2021 8:30 am

It’s easy . Just ignore my posts if facts bother you.


yes and no.
I think you often have valuable insights and obviously a lifetime of experience.
But, Just as bogleheads limited Craig’s pp posts to a thread or two on that forum, I don’t think your pp-is-a-risky-bet posts should muddy up every thread, unless it’s in the VP or Other section.

Sure, experienced membeers can hit the ignore button, but newcomers could potentially be confused, or turned off.


As a not so long ago newcomer...I will say again that the liberal usage of acronyms with no explanations were far more confusing than reading anything that mathjak has ever written anywhere at any time.
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Re: Staying the course with LTTs

Post by dockinGA » Thu Nov 04, 2021 6:01 pm

mathjak107 wrote:
Thu Nov 04, 2021 8:30 am
It’s easy . Just ignore my posts if facts bother you.

Exactly how i stated it last year is how this year played out.

Not that I can predict , but if you simply looked at the big picture you knew the inflation monster was popping his head up and things were not going to be good for assets sensitive to moderate inflation and rising rates and the pp certainly falls in that camp .

I am not saying to switch portfolios.. but by the same token you shouldn’t bury your head in the sand and just discount facts either …or make claims that no longer seem to apply and to claim the pp is not a bet on a particular outcome like low rates is doing just that.
dockinGA wrote:
Sat May 15, 2021 6:47 am
mathjak107 wrote:
Mon Mar 23, 2020 3:55 pm
can't even guess ..we may get a bump up in stocks if congress plays nice but that will be short lived .

being at the epee center here in nyc i can tell you things are getting worse and worse ...i think markets may only be 2/3;'s to half way to a bottom .
Just thought I would repost this one as a reminder of something that you also predicted, this time back in March 2020, literally at the absolute bottom of the market.
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Re: Staying the course with LTTs

Post by dockinGA » Thu Nov 04, 2021 6:17 pm

mathjak107 wrote:
Wed May 12, 2021 5:04 am
I would never compare anything in Europe when it comes to rates ….the govt wants rates negative there ..

Their banking system is terrible when it comes to loaning out money to small borrowers…

Negative rates acts as a tax on bank reserves so it compels the banks to lend ..

We have no such problem here nor do we want negative bond rates.

In any case while we can never say never odds are slim Tlt won’t be a weight ……I think betting so much on Tlt is not going to pan out well …..I would sooner have a higher equity level then so much riding on rates if I have to bet on something.


Odds are on any given day Tlt is down. But worse is a years interest can be gone in one session
And another reminder of your predictions. Just so everyone's aware, on May 12 2021 30 yr rates were 2.40%, today they are 1.96%. So, if you're counting at home, we'll give you credit for predicting a rise in LTT rates leading up to the highs of earlier this year, but no credit for the March 2020 stocks prediction of a further 2/3 decline, and no credit for your prediction that rates will continue to rise after your May 2021 prediction. But hey, 1 out of 3 ain't bad.
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