The Bond Dream Room

Discussion of the Bond portion of the Permanent Portfolio

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sophie
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Re: The Bond Dream Room

Post by sophie » Tue Oct 02, 2018 8:12 am

Thanks for posting, dualstow.

My bond allocation is still within the band limits. I'm not selling any, but I don't want to buy any either until the Fed decides it's done raising interest rates. Last statement I read says that will be sometime in 2020.
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Xan
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Re: The Bond Dream Room

Post by Xan » Tue Oct 02, 2018 10:41 am

sophie wrote:
Tue Oct 02, 2018 8:12 am
Thanks for posting, dualstow.

My bond allocation is still within the band limits. I'm not selling any, but I don't want to buy any either until the Fed decides it's done raising interest rates. Last statement I read says that will be sometime in 2020.

Shouldn't those rate hike expectations (at least in theory) be already priced in?
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Cortopassi
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Re: The Bond Dream Room

Post by Cortopassi » Tue Oct 02, 2018 11:54 am

Call me nuts, but just like gold, I am salivating at adding more bonds to my rebalance in January.
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buddtholomew
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Re: The Bond Dream Room

Post by buddtholomew » Tue Oct 02, 2018 12:25 pm

sophie wrote:
Tue Oct 02, 2018 8:12 am
Thanks for posting, dualstow.

My bond allocation is still within the band limits. I'm not selling any, but I don't want to buy any either until the Fed decides it's done raising interest rates. Last statement I read says that will be sometime in 2020.
Sophie, the time to buy LTT’s is when the FED is raising interest rates...raise too much and cause a recession. I want to own LTT’s when that cycle begins.
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sophie
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Re: The Bond Dream Room

Post by sophie » Wed Oct 03, 2018 8:39 am

thanks guys, needed those comments.

I've noticed that the interest rates are priced in just prior to each interest rate increase, but no more than a few weeks in advance. And, one or two more of those quarter point rate increases and we'll have a yield curve inversion. I have no idea what to do when that happens.

Last time there was a yield curve inversion was 2000-2001. Short term rates eventually dropped (when the stock market went down) and 30 years stayed flat until the US government stopped issuing them in 2002. The 20 year rates eventually dropped also, so presumably it would have worked out well to hold the 30 year bonds.

Not to say that will happen again, but rather that it is not automatically a disaster to buy 30 year bonds in a flat yield curve situation.
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Re: The Bond Dream Room

Post by jacksonM » Wed Oct 03, 2018 12:47 pm

Some of my original 30 year LTT's will be hitting the 20 years to maturity mark soon so I'll have to decide whether to sell and repurchase.

Seems to me that it would be an easier thing to do in a rising interest rate environment than the opposite. I wonder how PP'er's dealt with it when they were holding 14% bonds and rates were on the way down. That would have been a tough one to swallow. I think I would have been tempted to hold the 14% bond to maturity.
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Re: The Bond Dream Room

Post by ochotona » Wed Oct 03, 2018 4:57 pm

buddtholomew wrote:
Tue Oct 02, 2018 12:25 pm
sophie wrote:
Tue Oct 02, 2018 8:12 am
Thanks for posting, dualstow.

My bond allocation is still within the band limits. I'm not selling any, but I don't want to buy any either until the Fed decides it's done raising interest rates. Last statement I read says that will be sometime in 2020.
Sophie, the time to buy LTT’s is when the FED is raising interest rates...raise too much and cause a recession. I want to own LTT’s when that cycle begins.
It would be good to have some when the inevitable recession hits
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ochotona
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Re: The Bond Dream Room

Post by ochotona » Wed Oct 03, 2018 7:24 pm

Dear Lord of Bonds
Pray that Thou 10 year mayest hit 5%
As Antonacci sell indicator doth shine like the sun
For the sake of us sinners in cash and intermediates
we pray
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dualstow
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Re: The Bond Dream Room

Post by dualstow » Wed Oct 03, 2018 8:55 pm

ochotona wrote:
Wed Oct 03, 2018 7:24 pm
Dear Lord of Bonds
Pray that Thou 10 year mayest hit 5%
...
For the sake of us sinners in cash and intermediates
...
O0 Good stuff, Ocho.

I still hope that long bonds will soar when stocks come crashing down. I merely gave up some of that protection, or the chance of it, by unloading some bonds. Rising rates are not inevitable, but they sooooo look to be. So much so that I don't mind having just a little extra cash, something that will not soar, but won't sink either.

The strange thing is that I still feel fine at 50% stocks (vp + pp), even after checking what a 50% haircut would look like. (That is, 50% of 50% of my entire savings. A 25% haircut overall). I guess that's recency bias, or at least the psychological pull of recency. When it happens for real, I'm going to be ill.
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Re: The Bond Dream Room

Post by barrett » Thu Oct 04, 2018 5:36 am

Just jumping in to say that not all recessions are deflationary. One can't necessarily count on bond yields going down (and prices going up) uniformly across a recessionary cycle.
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Re: The Bond Dream Room

Post by Cortopassi » Thu Oct 04, 2018 8:43 am

My rebalance numbers just had TLT pass Gold/Silver in the amount that has to be put toward the assets to rebalance back to their level.

Since TLT is 25% and G+S is 30% for me, sure means bonds have been sucking lately.
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Re: The Bond Dream Room

Post by tim47 » Mon Nov 26, 2018 8:38 am

Has anyone heard of Street Shares Veteran Business Bonds that cap at 5%? Seems too good to be true. Comments?
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Re: The Bond Dream Room

Post by ochotona » Mon Nov 26, 2018 5:11 pm

tim47 wrote:
Mon Nov 26, 2018 8:38 am
Has anyone heard of Street Shares Veteran Business Bonds that cap at 5%? Seems too good to be true. Comments?
Any investment that plays on emotions and affiliations, like "veterans" or "woman owned" or "whites only" or "blacks only" or "'Murica" or "Allahu Akbar" should be avoided. Bernie Madoff's victims were members of his and other synagogues.

It's about cash flows, not emotional manipulations.

Typo error on website. Stay away. "While you support American small businss owners"

Fidelity® Capital & Income Fund pays 4.4% dividend. But... it's Junk Bonds. You OK with Junk Bonds?
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Re: The Bond Dream Room

Post by Kriegsspiel » Mon Nov 26, 2018 7:48 pm

ochotona wrote:
Mon Nov 26, 2018 5:11 pm
Typo error on website. Stay away. "While you support American small businss owners"
They can recover from that. I'm thinking a new ad with raucous "USA! USA!" chants looped over the fluttering Stars and Stripes. Say, 7-9 minutes long.
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Re: The Bond Dream Room

Post by dualstow » Tue Nov 27, 2018 8:26 am

ochotona wrote:
Mon Nov 26, 2018 5:11 pm
Typo error on website. Stay away.

Hah, you sound like me.
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ochotona
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Re: The Bond Dream Room

Post by ochotona » Wed Nov 28, 2018 8:03 pm

Today Kathy Jones of Schwab is suggesting investors buy bonds with 2 to 7 years duration, previously she was suggesting 2 to 5 years.
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dualstow
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Re: The Bond Dream Room

Post by dualstow » Thu Nov 29, 2018 6:44 am

ochotona wrote:
Wed Nov 28, 2018 8:03 pm
Today Kathy Jones of Schwab is suggesting investors buy bonds with 2 to 7 years duration, previously she was suggesting 2 to 5 years.
You can find a pundit for every duration and permutation.
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Re: The Bond Dream Room

Post by ochotona » Thu Nov 29, 2018 4:54 pm

Kathy is the guru for bond prudence and reasonableness. If you follow her your bond regrets will be rare. Budd would like her advice, for example.
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Re: The Bond Dream Room

Post by buddtholomew » Thu Nov 29, 2018 5:22 pm

ochotona wrote:
Thu Nov 29, 2018 4:54 pm
Kathy is the guru for bond prudence and reasonableness. If you follow her your bond regrets will be rare. Budd would like her advice, for example.
Thanks, but bonds don't scare me at all since I can manage duration to 5.6 years and have done so since portfolio inception.
That seems to fall nicely between 2 and 7 :)

As an aside I have tracked BND (VG Bond Index ETF) and LTT/Cash (5.6 years) performance and the daily differences are negligible.
Personally I just prefer cash so the barbell over bullet strategy works for me.
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dualstow
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Re: The Bond Dream Room

Post by dualstow » Thu Nov 29, 2018 7:07 pm

ochotona wrote:
Thu Nov 29, 2018 4:54 pm
Kathy is the guru for bond prudence and reasonableness. If you follow her your bond regrets will be rare. Budd would like her advice, for example.
I have no regrets about my pp bond holdings.
https://www.city-journal.org/journalism-advocacy-over-reporting
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Re: The Bond Dream Room

Post by dualstow » Thu Feb 07, 2019 10:06 am

The next Fed move may be an interest rate cut. Interesting.
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Re: The Bond Dream Room

Post by pmward » Thu Feb 07, 2019 10:48 am

Yeah there are a lot of people betting on a cut right now, which is why yields have fallen so sharply over the last few weeks. We will see. Powell was against being so aggressive on both quantitative easing and low interest rates a few years back, it would be very surprising to see him be the one to continue back down that path. But anything could happen. Personally, I have enjoyed getting some actual noticeable interest off of money markets.
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Re: The Bond Dream Room

Post by dualstow » Thu Feb 07, 2019 11:49 am

Oh, me too.
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ochotona
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Re: The Bond Dream Room

Post by ochotona » Wed Mar 27, 2019 6:47 pm

OMG bonds are on fire. I'm looking at the chart for SCHR, which is a 5 year bond ETF. Oversold on a daily and weekly basis, it looks like a bubble to me. I think it's time to take some profits, like tomorrow.
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Re: The Bond Dream Room

Post by pmward » Wed Mar 27, 2019 6:59 pm

I don't think having a few big up days constitutes a bubble. Especially since stocks and gold look like they both want to pull back. Bonds are over bought in the short term, and TLT has a big open gap that is likely to get closed at some point, but that doesn't mean they won't continue up especially in the medium to long term. They just put in a higher low, and a fresh new higher high; the very definition of a brand new up trend. Don't take profits until it breaks trend. At least use a stop loss or a trailing stop if you're wanting to try to actively take some profits early instead of just blindly selling into the start of a fresh new uptrend. Let the winner have a little room to run imo.
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