The Bond Dream Room

[barrett]

Snap Quiz Question: Which one should you pay most attention to in your decision?

I am going to go with tracking error, because the way my PP is set up, any gains are in tax-advantaged accounts. But I think the real answer is that both #1 and #2 should be considered. In other words, don't pay any taxes you don't have to but also remember that an investment plan only really works if you follow the basic ideas that make it work.

[Kbg]

Snap Quiz Question: Which one should you pay most attention to in your decision?

I am going to go with tracking error, because the way my PP is set up, any gains are in tax-advantaged accounts. But I think the real answer is that both #1 and #2 should be considered. In other words, don't pay any taxes you don't have to but also remember that an investment plan only really works if you follow the basic ideas that make it work.

No, taxes. The first is unknowable. If stocks go on a 20 year tear and you know they are going to do that starting today you would be an idiot to rebalance. If you want to track the PP then rebalance. However, you want to minimize taxes always and those costs are known. Accordingly, tax ramifications should influence how/where you will rebalance. 

[LC475]

No, taxes. The first is unknowable. If stocks go on a 20 year tear and you know they are going to do that starting today you would be an idiot to rebalance. If you want to track the PP then rebalance. However, you want to minimize taxes always and those costs are known. Accordingly, tax ramifications should influence how/where you will rebalance.

Current tax situation is known (to large extent).

Future tax situation is not.

[Kbg]

No, taxes. The first is unknowable. If stocks go on a 20 year tear and you know they are going to do that starting today you would be an idiot to rebalance. If you want to track the PP then rebalance. However, you want to minimize taxes always and those costs are known. Accordingly, tax ramifications should influence how/where you will rebalance.

Current tax situation is known (to large extent).

Future tax situation is not.

Excellent point. I can't argue with it. My only counter would be you know them when you actually have or may want to make a rebalance decision.

[dualstow]

Jan. 28, 2015 2:03 p.m. ET

WASHINGTON—The Federal Reserve on Wednesday committed to keeping short-term interest rates near zero at least until midyear and set the stage for tough debates in the months ahead about whether to wait even longer.

http://www.wsj.com/articles/fed-sticks- ... 1422471820

[barrett]

Thanks for posting that, Dualstow. LTTs seem to like that news but I am still waiting to see the "turbo-charged" price increases as rates get lower and lower. Not that I am complaining!!! (still can't believe I am holding those suckers)

[bedraggled]

I thank you all.  That the PP will drift within the 35/15 band is a lovely thing to contemplate

Bedraggled

[Reub]

Long bonds are going to the moon!

[Lowe]

So the Fed is sticking to raising the FFR by June?  Is that the end of June? 

Does anyone think they will do it?  I may hit a rebalance band before then anyway.

[dualstow]

So the Fed is sticking to raising the FFR by June?  Is that the end of June?  :-)

At least (until) midyear, it says. :-)

[bedraggled]

I am pleased for you fine people who have TLT and LTTs.

MY pre-retirement situation precludes me from participating (within a couple of years, though, no doubt, I will be in).

Wow!  New high upon new high!

As the esteemed Jimmy Olsen said  "Golly, Superman," or "Jeepers, Mr. Kent," depending, of course.

That's it!  TLT is the new Superman- until next weeks 10% correction.  But  TLT has not gone parabolic.  All is OK, for now  (CBSMarketwatch.com has suggested all the futures money is on the long side of the Treasuries and dollar contracts, so tread carefully).  I subscribe to a deflationist theory and I envy the folks long on bonds.  Fare ye well!  May PP increase 25% year end!

[dualstow]

MY pre-retirement situation precludes me from participating (within a couple of years, though, no doubt, I will be in).

Sorry to hear that. Does that mean you have a restricted retirement account from your employer?
Nothing in taxable?

[Kbg]

I'm doing the juiced up version and my oh my...UGLD up 26% and TMF up 23%

[bedraggled]

Dualstow,

Correct, restricted.  But all is ok.

Thanks,
Bedraggled

[barrett]

I am pleased for you fine people who have TLT and LTTs.

MY pre-retirement situation precludes me from participating (within a couple of years, though, no doubt, I will be in).

Wow!  New high upon new high!

It feels to me like the PP is getting a little ahead of itself. It has outrun inflation by 13% or so since the beginning of 2014. I realize that 2013 was not great but the 2009-2012 period was really strong as well with little inflation. In other words, real returns have been better than the historic 3%-6% so we will probably get a correction at some point. When bedraggle retires and sets up a PP, it might be at a favorable time. Having started mine just over a year ago, I feel super lucky with everything being up in that time. It was a great buying opportunity. But elation is one of those emotions that PPers don't really feel very often. We are really not trying to beat anyone, just outperform our former selves who thought they knew what the hell was going to happen next.

[bedraggled]

Barrett, et al,

I read the article on Iceland this morning.  Thanks.

Since I am restricted for a couple of years there may be a shake-out providing me with an opportunity.

The deflationist in me still loves TLT.

Yes, the PP seems to need a breather (correction).  As my grandfather once said "things are going too well."

[dragoncar]

But  TLT has not gone parabolic. 

I'm not even sure it CAN go parabolic at this point.  Wasn't maximum upside something like 50% (assuming positive interest rates).  I guess parabolic will happen when rates go negative.

[barrett]

LTTs way up again this morning. Anyone else besides me super surprised to see rates this low? I mean, I guess it makes sense in light of the fact that rates all over the world are low (at least in economies of decent size). I just find myself shaking my head. I know that I certainly can't predict the future but this move has really driven that concept home for me. Never saw this coming in a million years (I have a long investing timeline! ))

[MachineGhost]

LTTs way up again this morning. Anyone else besides me super surprised to see rates this low? I mean, I guess it makes sense in light of the fact that rates all over the world are low (at least in economies of decent size). I just find myself shaking my head. I know that I certainly can't predict the future but this move has really driven that concept home for me. Never saw this coming in a million years (I have a long investing timeline! )

FEAR = False Evidence Appearing Real. 

[barrett]

LTTs way up again this morning. Anyone else besides me super surprised to see rates this low? I mean, I guess it makes sense in light of the fact that rates all over the world are low (at least in economies of decent size). I just find myself shaking my head. I know that I certainly can't predict the future but this move has really driven that concept home for me. Never saw this coming in a million years (I have a long investing timeline! )

FEAR = False Evidence Appearing Real. 

Er, could you translate that for me, MG?

[Reub]

barrett, sometimes it's better not to try to analyze why it's happening and just enjoy the great ride.

[barrett]

barrett, sometimes it's better not to try to analyze why it's happening and just enjoy the great ride.

Right, I get it. But sometimes it is better to try to analyze why it's happening, right? I just don't know whether this is one of those times.

[bedraggled]

Richard Russell on December 29 suggested all the world's scared money would roll into the U S.  May just be happening with LTTs.  As discussed previously, TLT has never skyrocketed (+30%) for three years in a row.  Can international scared money effect exactly that?  Russell mentioned this international money would enter the U S stock markets.  We will see but VTI seems to be staying above 100.  Anyone have a thought?

[goodasgold]

Richard Russell... suggested all the world's scared money would roll into the U S.  May just be happening with LTTs...  Can international scared money effect exactly that?

We are living in unsettled times, and it is entirely possible that frightened international investors  will pour their money into U.S. LTTs.

But they can pull it out again just as quickly when the fear diminishes.

Lesson: As always, stick with 4x25 and rebalance as necessary.

[bedraggled]

good point.  Now take it a step more-  and mix in deflation with that scared international money base and a tasty stew may result.  'Tis to be seen.

A the best to you with TLT and LTTs.