The Bond Dream Room

[MachineGhost]

What happens when the yield curve flattens like a pancake and possibly inverts? Is it the Big Boom?

Not if the Fed has anything to say about it!

[Lang]

What happens when the yield curve flattens like a pancake and possibly inverts? Is it the Big Boom?

New Zealand now has a very, very flat yield curve:

http://www.investing.com/rates-bonds/ne ... ity_to=180

They don't i ssue bonds with maturity greater than 10 years, though.

[Alanw]

And we've been told the last several years that interest rates had nowhere to go but up. Are US treasury yields heading toward Germany, Great Britain and Japan type yields?

[barrett]

Bond yields going this low has certainly been an education for me. I sold a few when the yield first dipped below 3% and thought I was some kind of market timing genius. So I was a shade underweighted in LTTs the last couple months only to see them recently pull even with my stock and gold holdings.

[Lang]

And we've been told the last several years that interest rates had nowhere to go but up.

Well, they have nowhere to go but up if they are zero, although there are some strange cases of bonds trading at negative yields.

Switzerland has a 12 year bond trading at a yield to maturity of 0.3%. Even if the yield drops to 0%, the capital gain on that bond will be a measly 3%. Is this really worth the downside risk?

[murphy_p_t]

And we've been told the last several years that interest rates had nowhere to go but up. Are US treasury yields heading toward Germany, Great Britain and Japan type yields?

why not?!  dont markets largely move in tandem globally?

[Alanw]

And we've been told the last several years that interest rates had nowhere to go but up. Are US treasury yields heading toward Germany, Great Britain and Japan type yields?

why not?!  dont markets largely move in tandem globally?

How many forum members at the beginning of 2014 thought long bonds would be the big PP portfolio winner for the year? If the US bond market follows global markets, we may have more upside. Could LTT's be the big winner again in 2015?

[Reub]

Our bond yields look high if you're in Europe or even Japan.

[murphy_p_t]

"Could LTT's be the big winner again in 2015?"

I wouldn't bet against it...

[DragonJoey3]

30 year treasuries at all time low interest rate today.  Happy Friday everyone!

[barrett]

Fascinating to see this. I hope bedraggled forgives me for talking him out of loading way up on LTTs when they were at 3%. When I bought LTTs for the first time last year through TD Aneritrade, the guy who was taking me through the steps on their website said, "Er, I wouldn't buy those things if I were you."

[buddtholomew]

Fascinating to see this. I hope bedraggled forgives me for talking him out of loading way up on LTTs when they were at 3%. When I bought LTTs for the first time last year through TD Aneritrade, the guy who was taking me through the steps on their website said, "Er, I wouldn't buy those things if I were you."

barrett, what, if anything, are you doing with your long-term treasury holdings? I have been tempted 6 out of the last 5 trading sessions to sell a portion and harvest some gains. I continue to sit tight as reducing my exposure to less than 25% could strain the performance of the PP if equities and/or gold declines. 30%+ gains are difficult to ignore if you believe in reversion to the mean. Alternatively, we have international investors purchasing our bonds to drive yields lower as US rates are significantly higher than international development countries. The higher dollar is icing on the cake.

SPY 27.10%
GLD 22.49%
TLT 24.50%
CSH 25.90%

[dragoncar]

Fascinating to see this. I hope bedraggled forgives me for talking him out of loading way up on LTTs when they were at 3%. When I bought LTTs for the first time last year through TD Aneritrade, the guy who was taking me through the steps on their website said, "Er, I wouldn't buy those things if I were you."

barrett, what, if anything, are you doing with your long-term treasury holdings? I have been tempted 6 out of the last 5 trading sessions to sell a portion and harvest some gains. I continue to sit tight as reducing my exposure to less than 25% could strain the performance of the PP if equities and/or gold declines. 30%+ gains are difficult to ignore if you believe in reversion to the mean. Alternatively, we have international investors purchasing our bonds to drive yields lower as US rates are significantly higher than international development countries. The higher dollar is icing on the cake.

SPY 27.10%
GLD 22.49%
TLT 24.50%
CSH 25.90%

Dude just leave it alone :-)

[buddtholomew]

That's the same advice I would give to someone posing the same question. Dude...chill...

[dragoncar]

That's the same advice I would give to someone posing the same question. Dude...chill...

Well if you absolutely must tinker, here's what I suggest:

You currently have:
SPY 27.10%
GLD 22.49%
TLT 24.50%
CSH 25.90%

Bonds are way up recently, so you should sell those.

Now you have:
SPY 27.10%
GLD 22.49%
CSH 50.4%

As you know, the S&P is flirting with all-time highs.  So sell those too.

Now you have:
GLD 22.49%
CSH 77.5%

You, more than anyone, know what a pain in the ass gold is.  It's tanked quite a bit over the last few years.  Best be rid of it.

Now you have:
CSH 100%

The downside to holding all this cash is the coming hyperinflation of the USD.  So you should sell that too.  I'll buy it all for a six-pack of beer.

Now you have:
Beer

Drink the beer.

[Reub]

funny stuff!

[barrett]

barrett, what, if anything, are you doing with your long-term treasury holdings? I have been tempted 6 out of the last 5 trading sessions to sell a portion and harvest some gains. I continue to sit tight as reducing my exposure to less than 25% could strain the performance of the PP if equities and/or gold declines.

Thanks for thinking of me, Budd! I am tempted but sitting tight as well. I did sell a few late last year to come back to 4X25 but I wasn't very heavy in long bonds to begin with. It's a case of where letting momentum ride would have been a plus but I am still learning.

I understand risk parity better than I used to and it seems that fiddling with PP doesn't really help much.

[dualstow]

I understand risk parity better than I used to and it seems that fiddling with PP doesn't really help much.

It's like Contact when they made Jodie Foster sit in that ridiculous safety chair with a harness, when all the while the aliens had prepared everything for her safe travel, no chair needed.

[moda0306]

I understand risk parity better than I used to and it seems that fiddling with PP doesn't really help much.

It's like Contact when they made Jodie Foster sit in that ridiculous safety chair with a harness, when all the while the aliens had prepared everything for her safe travel, no chair needed.

Wow.  That's quite the analogy.  And I like it.

[Reub]

I'll say it once again. Long term bonds are something that I probably never would have owned before learning of the HBPP. And to paraphrase an old Saturday Night Live skit:

"Bonds be berry berry goood to me!"

[dualstow]

It's like Contact when they made Jodie Foster sit in that ridiculous safety chair~
...

Wow.  That's quite the analogy.  And I like it.

Thanks.  That always sticks in my mind.

"Bonds be berry berry goood to me!"

I remember that skit! Baseball's been beddy beddy good to me.
If I were Victoria F on bogleheads I'd be making some joke like baseball -> bonds been berry good -> Barry Bonds!

[moda0306]

I'll say it once again. Long term bonds are something that I probably never would have owned before learning of the HBPP. And to paraphrase an old Saturday Night Live skit:

"Bonds be berry berry goood to me!"

No kidding. Long term treasury bonds, especially. They just feeeel so idiotic to own until you see how they work as part of the machine. 

After seeing ltt performance in 2008 I was a bit flabbergasted (even though I should have known that's what they'd do if interest rates fell). Really is one of the biggest "aha" moments of my life, as it lead me here and to Harry Browne.

[Lang]

The market seems scared shitless. It's like it doesn't believe the US recovery is genuine and sustainable. Good for long-term bond investors, bad for...everyone else?

[MachineGhost]

I understand risk parity better than I used to and it seems that fiddling with PP doesn't really help much.

Depends on what the definition of "much" is.

[MachineGhost]

No kidding. Long term treasury bonds, especially. They just feeeel so idiotic to own until you see how they work as part of the machine. 

After seeing ltt performance in 2008 I was a bit flabbergasted (even though I should have known that's what they'd do if interest rates fell). Really is one of the biggest "aha" moments of my life, as it lead me here and to Harry Browne.

Just remember, bonds don't always pull a 2008.  That's what that gold is for!