When is it time to load up on bonds.
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When is it time to load up on bonds.
My grandparents were of the depression generation. They never had really high paying jobs nor did they ever invest a penny into the stock market or real estate etc. However, they did retire with a pretty good nestegg thanks to thrifty savings and also the fact that they saved most of their money in cds. And buying a long term cd or Treasury at 12% in the 1980s and holding it to maturity worked out VERY well for them indeed as interest rates in the 1990s dropped into the 5% range.
So at what point would it be prudent to load up on some cds and bonds with the expectation that rates will not go much higher and in 5 years you will love the rate you got? Can anyone see a scenario where rates go above 10% in the future or is 5-6% going to be the breaking point and the point at which we should back up the truck on long term cds and bonds?
So at what point would it be prudent to load up on some cds and bonds with the expectation that rates will not go much higher and in 5 years you will love the rate you got? Can anyone see a scenario where rates go above 10% in the future or is 5-6% going to be the breaking point and the point at which we should back up the truck on long term cds and bonds?
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Re: When is it time to load up on bonds.
Is the future of the US to become Japan or Argentina/Venezuela? Biden is getting away with very high inflation. No riots in sight.
30 yr 3.48%, plenty of room to zero
I'm underweight LTTs and gold and think of them as insurance.
30 yr 3.48%, plenty of room to zero
I'm underweight LTTs and gold and think of them as insurance.
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Re: When is it time to load up on bonds.
I used to think I would back up the truck if bonds got to 5%. 20 years are around 4.2% now.
https://www.investing.com/rates-bonds/u ... ?desktop=1
Standard permanent portfolio looking better and better but with the low end of the curve paying just as much I don't think I would want to take risk on long bonds still.
https://www.investing.com/rates-bonds/u ... ?desktop=1
Standard permanent portfolio looking better and better but with the low end of the curve paying just as much I don't think I would want to take risk on long bonds still.
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Re: When is it time to load up on bonds.
I've been wondering the same thing about when it's time to load up. All of the assets move up and down, and bonds are clearly down. And by loading up, I really just mean bringing bonds back to 20% (I run a GB and I'm a bit low).
It seems that The Fed hasn't damaged the economy enough yet, so there may still be interest rate increases and time to wait. Each increase gives them more ammo to use when they decide to revive things again.
But with other assets, I usually assume that I'm not smart or lucky enough to time the bottom, so I accept that I will buy through the trough. Some early, some late, and maybe a lucky purchase near the very bottom.
It seems that The Fed hasn't damaged the economy enough yet, so there may still be interest rate increases and time to wait. Each increase gives them more ammo to use when they decide to revive things again.
But with other assets, I usually assume that I'm not smart or lucky enough to time the bottom, so I accept that I will buy through the trough. Some early, some late, and maybe a lucky purchase near the very bottom.
Re: When is it time to load up on bonds.
I think the answer is in the rebalance bands of the portfolio you are running. The rest would be market timing.jalanlong wrote: ↑Thu Sep 15, 2022 1:05 pm My grandparents were of the depression generation. They never had really high paying jobs nor did they ever invest a penny into the stock market or real estate etc. However, they did retire with a pretty good nestegg thanks to thrifty savings and also the fact that they saved most of their money in cds. And buying a long term cd or Treasury at 12% in the 1980s and holding it to maturity worked out VERY well for them indeed as interest rates in the 1990s dropped into the 5% range.
So at what point would it be prudent to load up on some cds and bonds with the expectation that rates will not go much higher and in 5 years you will love the rate you got? Can anyone see a scenario where rates go above 10% in the future or is 5-6% going to be the breaking point and the point at which we should back up the truck on long term cds and bonds?
In my 4xHBPP, LTTs were about 20% when I checked last time a few days ago.
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Re: When is it time to load up on bonds.
I will absolutely be buying LTTs and directly holding them, now that I am with Fidelity, when I think they have peaked for this cycle, which I assume will be sometime between next month and 1st quarter 2023. If I can get 5+% on 30 years, I can sort of make my own annuity!
Should I be worried about inflation? Maybe I guess?
I am 55, so I'd target a much greater % than 25% PP. Maybe 50%. Would let me feel more comfortable about letting the rest ride a bit on riskier stuff.
Should I be worried about inflation? Maybe I guess?
I am 55, so I'd target a much greater % than 25% PP. Maybe 50%. Would let me feel more comfortable about letting the rest ride a bit on riskier stuff.
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Re: When is it time to load up on bonds.
Macrovoices podcast guest argument for global depression that takes rates back to zero.
https://www.macrovoices.com/1119-macrov ... lies-ahead
https://www.macrovoices.com/1119-macrov ... lies-ahead
Re: When is it time to load up on bonds.
I'm hoping that the greater-than-4% yields for the six-month to seven-year treasuries are going to give the PP a solid basis for the next few years. I'm hoping to lock in some decent yields. I don't know about the 30-year, but my gut says 4% will be about as high as it goes before the economy suffers. Maybe 4.5%. I think now, or early next year, would be a good time to start a PP. I'm quite optimistic after suffering this sucky year. But we'll see.
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Re: When is it time to load up on bonds.
I decided it was time to get back into long bonds sometime last month and went pure permanent portfolio in the accounts I was able to in.
My thought process was that your best opportunity to take advantage of long bonds is when the yield curve gets as inverted as much as it is now.
https://www.longtermtrends.net/us-treasury-yield-curve/
I know I missed the highest rates but historically rates will be coming back down from here now that we are so inverted.
So maybe the question is when to get back out of long bonds?
My thought is to get out of long bonds again when the 3 month rate gets slammed back down. Even if 3 month is 0% and 30 year is 3%, we have seen what can happen from there.
Basically, only bother with long bonds when the yield curve is inverted.
My thought process was that your best opportunity to take advantage of long bonds is when the yield curve gets as inverted as much as it is now.
https://www.longtermtrends.net/us-treasury-yield-curve/
I know I missed the highest rates but historically rates will be coming back down from here now that we are so inverted.
So maybe the question is when to get back out of long bonds?
My thought is to get out of long bonds again when the 3 month rate gets slammed back down. Even if 3 month is 0% and 30 year is 3%, we have seen what can happen from there.
Basically, only bother with long bonds when the yield curve is inverted.
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Re: When is it time to load up on bonds.
I have also started getting back into bonds, but with a twist, since I am ~4 years from at least a semi-retirement.
I am taking advantage of higher long term (30+ years) investment grade individual corporate bonds as I am moving toward wanting known income in retirement.
My plan over the next few months is to get 60-80% of my "available" to trade net worth into long term (i.e. likely not maturing before our death) corp, muni and other high grade bonds.
I have plowed about 10% into 11 different bonds with an average coupon of just a hair over 6%. All are Make Whole type bonds, so if they are called I would get most of the interest that was due over the life of the bond.
Inflation, disinflation, stock market, underlying value of these bonds, I hope to not give a crap about any of that long term.
While I am working, as the coupons come in, I will continue to either buy more bonds, or dividend paying ETFs.
In the end here I will have a pretty lopsided permanent portfolio, maybe it will look like:
60% LT bonds and inflation protected bonds (i-bonds and a TIP fund)
20% gold
15% ST money market
5% dividend paying stocks
Or something close to that. It works well for me mentally. I expect some significant underlying appreciation over the next couple years, but I have no intention of trading. This is for long term retirement income.
I am taking advantage of higher long term (30+ years) investment grade individual corporate bonds as I am moving toward wanting known income in retirement.
My plan over the next few months is to get 60-80% of my "available" to trade net worth into long term (i.e. likely not maturing before our death) corp, muni and other high grade bonds.
I have plowed about 10% into 11 different bonds with an average coupon of just a hair over 6%. All are Make Whole type bonds, so if they are called I would get most of the interest that was due over the life of the bond.
Inflation, disinflation, stock market, underlying value of these bonds, I hope to not give a crap about any of that long term.
While I am working, as the coupons come in, I will continue to either buy more bonds, or dividend paying ETFs.
In the end here I will have a pretty lopsided permanent portfolio, maybe it will look like:
60% LT bonds and inflation protected bonds (i-bonds and a TIP fund)
20% gold
15% ST money market
5% dividend paying stocks
Or something close to that. It works well for me mentally. I expect some significant underlying appreciation over the next couple years, but I have no intention of trading. This is for long term retirement income.
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Re: When is it time to load up on bonds.
My view of the inverted yield curve situation is that the market thinks high inflation is just a short-term blip, so that interest rates will fall again within just a few years, dashing hopes of 30-year treasuries that return more than 3% and change. As a result I don't anticipate getting back into fixed income anytime soon. I still see too much downside risk to the principal counterbalanced by not enough upside potential or returns.
Make Whole bonds from super-long-lived institutions like universities are another story, and I think there's a lot to like about that idea of Cortopasi's, especially with an eye towards retirement within a few years. I would definitely take a bond from MIT over Proctor & Gamble or Amazon.
Make Whole bonds from super-long-lived institutions like universities are another story, and I think there's a lot to like about that idea of Cortopasi's, especially with an eye towards retirement within a few years. I would definitely take a bond from MIT over Proctor & Gamble or Amazon.
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Re: When is it time to load up on bonds.
I hope I, and you, are right, PS.
On a related note, since moving into bonds full bore, I have also tuned out a variety of generally bearish financial websites I used to read, going on three weeks now. Helps.
I look at my accounts and see the underlying bond values in total go up a few thousand every day, or down, and I’ve already grown accustomed to it. All I want are the coupons.
I’m not sure why you wouldn’t want to get into LT bonds if you believe rates will fall? The underlying would go up significantly as rates drop.
On a related note, since moving into bonds full bore, I have also tuned out a variety of generally bearish financial websites I used to read, going on three weeks now. Helps.
I look at my accounts and see the underlying bond values in total go up a few thousand every day, or down, and I’ve already grown accustomed to it. All I want are the coupons.
I’m not sure why you wouldn’t want to get into LT bonds if you believe rates will fall? The underlying would go up significantly as rates drop.
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Re: When is it time to load up on bonds.
Rates will definitely fall, but the Fed will tell us when they intend to make it happen. Today Powell told us he intends to continue raising rates. More slowly than before, but still, they're going to keep going up. And he told us exactly when he'll stop: once inflation dips below the Fed's 2% target.Cortopassi wrote: ↑Wed Feb 01, 2023 9:14 pm I’m not sure why you wouldn’t want to get into LT bonds if you believe rates will fall? The underlying would go up significantly as rates drop.
Now, maybe market or political considerations will cause the Fed to deviate from this plan, and that's possible and unknowable. Barring that, we have a really really clear view of what's going to happen in the future and when. Once inflation gets below 2%, that's the time to back up the truck for LT bonds.
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Re: When is it time to load up on bonds.
I don’t disagree, PS, but if 2000 and 2008 taught me anything, it’s that whatever plans are hoped for will deviate, probably significantly, and sooner than ever anticipated, and I’d rather be early and get my 100 year 6% coupons.
But if we end 2023 and FFR is at 6% or something, I will be gnashing my teeth for at least a while! But I’ll just turn around and reinvest the coupons in higher rate bonds at the time, since I won’t need to touch that money until I retire in a few years.
I feel like for once I have a decent shot at being long term right on this, which is probably a really bad sign.
But if we end 2023 and FFR is at 6% or something, I will be gnashing my teeth for at least a while! But I’ll just turn around and reinvest the coupons in higher rate bonds at the time, since I won’t need to touch that money until I retire in a few years.
I feel like for once I have a decent shot at being long term right on this, which is probably a really bad sign.
Re: When is it time to load up on bonds.
I think this reasoning would make sense if the yield curve wasn't so inverted. I suspect that by the time inflation is below 2% the yield on the 30-year will be much closer to 2% itself. Today it's at 3.55%. At the end of last year it was 3.97%. It's going down despite the Fed raising the overnight rate. With hindsight, the time to load up was October 24 last year when the yield was 4.40%. I can confirm the great recent and welcome gains in LTTs, although they still are underweight in my PP.Pointedstick wrote: ↑Wed Feb 01, 2023 9:22 pm Once inflation gets below 2%, that's the time to back up the truck for LT bonds.
Also, inflation (CPI-U) from June to now (to December, so six months) has been zero. If that continues, we have maybe three months before annual inflation is below 2%. That coincides with the end of the covid national emergency in May. Interesting times. The CPI-U increase from last May to today (seven months) has been just 1.54%.
So with the inverted curve, the decline in long-end yields, and little recent inflation, I'm optimistic about the next few months for LTTs. But who knows?
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Re: When is it time to load up on bonds.
FWIW I'm not actually planning to buy any bonds unless a clearly amazing opportunity arises. My plan is to just keep buying 100% stocks. Last year offered some great discounts! ![Azn ^-^](./images/smilies/azn.gif)
![Azn ^-^](./images/smilies/azn.gif)
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Re: When is it time to load up on bonds.
Some people say that the Fed's inflation target is actually a 2% average over time, the duration of which remains a mystery. So the Fed will hold interest rates higher for longer than many people expect.
Re: When is it time to load up on bonds.
flyingpylon wrote: ↑Thu Feb 02, 2023 7:28 am
Some people say that the Fed's inflation target is actually a 2% average over time, the duration of which remains a mystery. So the Fed will hold interest rates higher for longer than many people expect.
You can hear Powell's own thoughts here:
https://www.c-span.org/video/?523967-1/ ... -rates-025
FEBRUARY 1, 2023
Federal Reserve Chair Holds News Conference
Federal Reserve Chair Jerome Powell announced another interest rate hike to address inflation and intimated additional increases are likely in the future. Chair Powell spoke about the economic outlook, the increase and other new monetary policy actions at a news conference in Washington, DC. He also weighed in on the debt ceiling debate saying there’s “only one way forward,” and that’s for Congress to increase it. He stressed any other actions would be “highly risky” to the U.S. economy.
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: When is it time to load up on bonds.
One guys' commentary I do still read is Hussman. The article linked below is the latest. A couple quotes stood out:
"Over the past year, the S&P 500 has retreated only modestly from its January 2022 speculative peak, yet interest rates have normalized to a much greater extent. That, in my view, is probably the most dangerous aspect of the current market environment. We continue to observe valuations that were created only as the result of a decade of reckless zero-interest rate policy, yet zero-interest rate policy is no longer present."
"With interest rates now well above zero, the primary causes and conditions of the recent speculative bubble are no longer in place. The persistence of rich valuations here are, in my view, largely the result of psychological anchoring and hindsight that treats past prices as a standard of value. We saw the same thing during the 2000-2002 collapse, and it’s dangerous. I had friends who were wiped out, not by buying at the top, but by assuming that once prices had declined by 15%, or 20%, or in some cases 50% from the highs, the retreat somehow represented “value.”
https://www.hussmanfunds.com/comment/mc230123/
I think I've made a few comments in the past how if I could get 5% in a money market, I'd pretty much quit trying to any extent to make money in stocks because of my emotional reaction to stocks and trading. Well, we are there. And if most/all of that 5% gets eaten up by inflation, I'll have to deal with it as it happens.
I don't see any scenario where I even get close to the standard 25% in stocks PP without some major discount rivaling 2000/2008
"Over the past year, the S&P 500 has retreated only modestly from its January 2022 speculative peak, yet interest rates have normalized to a much greater extent. That, in my view, is probably the most dangerous aspect of the current market environment. We continue to observe valuations that were created only as the result of a decade of reckless zero-interest rate policy, yet zero-interest rate policy is no longer present."
"With interest rates now well above zero, the primary causes and conditions of the recent speculative bubble are no longer in place. The persistence of rich valuations here are, in my view, largely the result of psychological anchoring and hindsight that treats past prices as a standard of value. We saw the same thing during the 2000-2002 collapse, and it’s dangerous. I had friends who were wiped out, not by buying at the top, but by assuming that once prices had declined by 15%, or 20%, or in some cases 50% from the highs, the retreat somehow represented “value.”
https://www.hussmanfunds.com/comment/mc230123/
I think I've made a few comments in the past how if I could get 5% in a money market, I'd pretty much quit trying to any extent to make money in stocks because of my emotional reaction to stocks and trading. Well, we are there. And if most/all of that 5% gets eaten up by inflation, I'll have to deal with it as it happens.
I don't see any scenario where I even get close to the standard 25% in stocks PP without some major discount rivaling 2000/2008
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Re: When is it time to load up on bonds.
This is the speech that's often cited, by John C Williams of the New York Fed on 11/30/2018.flyingpylon wrote: ↑Thu Feb 02, 2023 7:28 am Some people say that the Fed's inflation target is actually a 2% average over time, the duration of which remains a mystery. So the Fed will hold interest rates higher for longer than many people expect.
Monetary Policy Strategies for a Low-Neutral-Interest-Rate World
Note that he does make the disclaimer that this is his personal opinion.
Re: When is it time to load up on bonds.
I feel kind of bad for Hussman. Yes, I used to read him too, but as far as I can see he's never really recovered from the beating he took after the Global Financial Crisis (when he didn't get back in after the lows because he was worried about the danger of a true depression). He's turned into something of a permabear, albeit more logical than most.Cortopassi wrote: ↑Thu Feb 02, 2023 8:00 am One guys' commentary I do still read is Hussman. The article linked below is the latest. A couple quotes stood out:
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Re: When is it time to load up on bonds.
I agree. Can go down the rabbit hole with him as easily as any others, but he puts a lot of analysis and charts into it which makes it "feel" more valid, but in the end no one really knows because so much is psychology, and machines nowadays.stpeter wrote: ↑Thu Feb 02, 2023 3:34 pmI feel kind of bad for Hussman. Yes, I used to read him too, but as far as I can see he's never really recovered from the beating he took after the Global Financial Crisis (when he didn't get back in after the lows because he was worried about the danger of a true depression). He's turned into something of a permabear, albeit more logical than most.Cortopassi wrote: ↑Thu Feb 02, 2023 8:00 am One guys' commentary I do still read is Hussman. The article linked below is the latest. A couple quotes stood out:
Re: When is it time to load up on bonds.
And, as I learned in 2007-08, the extent to which other countries are faring even worse.Cortopassi wrote: ↑Thu Feb 02, 2023 3:52 pm I agree. Can go down the rabbit hole with him as easily as any others, but he puts a lot of analysis and charts into it which makes it "feel" more valid, but in the end no one really knows because so much is psychology, and machines nowadays.
Re: When is it time to load up on bonds.
I've been buying max duration LTT's at the moment. I am going with the thesis that the yield curve inversions are telling us something significant.
Re: When is it time to load up on bonds.
I believe timing the interest rates market is as much a fool's game as picking individual stocks. So I've been just following my rules and buying stuff up.
I will admit that with another 15+ years on my career horizon, buying bonds is a lot easier right now just cause its "cheaper" relative to the 52-week high's / lows. (conversely, it's hard to stomach buying more SCV etfs right now).
But I'm actually slightly underweight LTT's because I am still slowly bleeding my money into the market so I'm building up the stock portion of my portfolio up be at least 40% of the overall portfolio (just hit that mark this week) before adding more gold or LTT's (currently about 10% each...with the rest in cash/tbills).
FWIW I've been averaging in, hitting a target number (that increases slightly each week), instead of DCA'ing (investing a set quantity of money each week). So if the market is hot, I spend less money that week, and it drops, I push more cash in. Took a while to get comfortable with this approach but I'm getting used to it with practice.
I will admit that with another 15+ years on my career horizon, buying bonds is a lot easier right now just cause its "cheaper" relative to the 52-week high's / lows. (conversely, it's hard to stomach buying more SCV etfs right now).
But I'm actually slightly underweight LTT's because I am still slowly bleeding my money into the market so I'm building up the stock portion of my portfolio up be at least 40% of the overall portfolio (just hit that mark this week) before adding more gold or LTT's (currently about 10% each...with the rest in cash/tbills).
FWIW I've been averaging in, hitting a target number (that increases slightly each week), instead of DCA'ing (investing a set quantity of money each week). So if the market is hot, I spend less money that week, and it drops, I push more cash in. Took a while to get comfortable with this approach but I'm getting used to it with practice.
1/n weirdo. US-TSM, US-SCV, Intl-SCV, LTT, STT, GLD (+ a little in MF)