The Bond Dream Room

Discussion of the Bond portion of the Permanent Portfolio

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Kriegsspiel
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Re: The Bond Dream Room

Post by Kriegsspiel » Thu May 17, 2018 8:46 am

I haven't bought bonds in years. Back when I was working I'd buy the lagging asset. Now that I'm going back to work I'm going to accumulate cash until I need to rebalance.
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Re: The Bond Dream Room

Post by buddtholomew » Thu May 17, 2018 10:57 am

That’s what kills me about this forum...
I say what everyone is thinking and also doing and get berated...
If everyone is so happy with the PP why aren’t you sticking to the plan?
Tell me.
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Re: The Bond Dream Room

Post by dualstow » Thu May 17, 2018 11:49 am

buddtholomew wrote:
Thu May 17, 2018 10:57 am
That’s what kills me about this forum...
I say what everyone is thinking and also doing and get berated...
If everyone is so happy with the PP why aren’t you sticking to the plan?
Tell me.
I'm not thrilled with the performance of the pp right now, but I also am not ready to give up on it.
None of my assets are out of the rebalancing bands, and if I let them breach a band, I'll say so.
I don't expect gold and long bonds to go up just because stocks are down, on the same day that they go down.
These are trying times, for sure, but it's just not productive to complain on a daily or hourly basis.
And, even if I *do* eventually leave the pp behind, it will be without any regret. I'm not losing money. The portion of my holdings that constitute the pp are doing just fine as a complete package.

You know it's entirely possible that gold will soar in the future but many of us were afraid to stock up while it was on sale (now).
It's also quite possible that long term rates will not follow short term rate rises. Nobody knows nothin'.

All is well, Budd. Just chill, enjoy life, put money away for the future.
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buddtholomew
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Re: The Bond Dream Room

Post by buddtholomew » Thu May 17, 2018 11:56 am

dualstow wrote:
Thu May 17, 2018 11:49 am
buddtholomew wrote:
Thu May 17, 2018 10:57 am
That’s what kills me about this forum...
I say what everyone is thinking and also doing and get berated...
If everyone is so happy with the PP why aren’t you sticking to the plan?
Tell me.
I'm not thrilled with the performance of the pp right now, but I also am not ready to give up on it.
None of my assets are out of the rebalancing bands, and if I let them breach a band, I'll say so.
I don't expect gold and long bonds to go up just because stocks are down, on the same day that they go down.
These are trying times, for sure, but it's just not productive to complain on a daily or hourly basis.
And, even if I *do* eventually leave the pp behind, it will be without any regret. I'm not losing money. The portion of my holdings that constitute the pp are doing just fine as a complete package.

You know it's entirely possible that gold will soar in the future but many of us were afraid to stock up while it was on sale (now).
It's also quite possible that long term rates will not follow short term rate rises. Nobody knows nothin'.

All is well, Budd. Just chill, enjoy life, put money away for the future.
Did not intend to suggest this applied to you specifically DS. I cannot complain because I am stock heavy, but it’s also misleading to those following the PP to the letter when others are not and telling you to relax.

We should all realize that any move away from 4 x 25 is exactly what we should worry about as our emotions and current economic climate may be clouding our judgement.
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Re: The Bond Dream Room

Post by flyingpylon » Thu May 17, 2018 11:57 am

buddtholomew wrote:
Thu May 17, 2018 10:57 am
That’s what kills me about this forum...
I say what everyone is thinking and also doing and get berated...
If everyone is so happy with the PP why aren’t you sticking to the plan?
Tell me.
Perhaps the people sticking to the plan are not yapping about it. Just a thought.
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Re: The Bond Dream Room

Post by Kriegsspiel » Thu May 17, 2018 12:00 pm

buddtholomew wrote:
Thu May 17, 2018 10:57 am
That’s what kills me about this forum...
I say what everyone is thinking and also doing and get berated...
If everyone is so happy with the PP why aren’t you sticking to the plan?
Tell me.
I'll assume you were talking to me; I haven't hit any rebalancing bands. Since I started my CAGR has been between 3-5% real, which is what I expect the PP to do. I have mostly been saving up cash to buy a house, and some stocks in a tax-deferred space.

IIRC my overall allocation is pretty similar to yours, since my VP is all stocks, plus cash/real estate.
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Re: The Bond Dream Room

Post by dualstow » Thu May 17, 2018 1:52 pm

buddtholomew wrote:
Thu May 17, 2018 11:56 am
Did not intend to suggest this applied to you specifically DS. I cannot complain because I am stock heavy, but it’s also misleading to those following the PP to the letter when others are not and telling you to relax.
I certainly didn't take it as directed at me.
Yeah, I think it's important to reveal when one is tinkering or even letting their portfolio drift.
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Re: The Bond Dream Room

Post by dualstow » Thu May 17, 2018 2:50 pm

I just want to add: I've always been interested in Wellington and Wellesley (Vanguard funds). Boglehead madsinger, who has a pp of his own by the way, keeps tabs on how they're doing, among other portfolios. There are plenty of people who would never go for the pp but who would happily invest in the W's. They're not doing so hot either, as you can see.

https://www.bogleheads.org/forum/viewtopic.php?t=246040 (march 2018)

https://www.bogleheads.org/forum/viewto ... 0&t=248532 (april 2018)
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Re: The Bond Dream Room

Post by buddtholomew » Thu May 17, 2018 3:47 pm

flyingpylon wrote:
Thu May 17, 2018 11:57 am
buddtholomew wrote:
Thu May 17, 2018 10:57 am
That’s what kills me about this forum...
I say what everyone is thinking and also doing and get berated...
If everyone is so happy with the PP why aren’t you sticking to the plan?
Tell me.
Perhaps the people sticking to the plan are not yapping about it. Just a thought.
Certainly possible, but I can’t know what lurkers are doing only those that post. Perhaps lurkers are the biggest offenders :o
Last edited by buddtholomew on Thu May 17, 2018 7:44 pm, edited 1 time in total.
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Re: The Bond Dream Room

Post by eufo » Thu May 17, 2018 6:51 pm

sophie wrote:
Thu May 17, 2018 7:03 am
So besides dualstow, what are all of you doing about bonds?
I've been buying the dip in bonds. I was buying mid caps before that and it's paid off nicely (for now, anyway). Sticking to the plan. Am I alone?
Don't agree with me too strongly or I'm going to change my mind
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Re: The Bond Dream Room

Post by buddtholomew » Thu May 17, 2018 8:55 pm

eufo wrote:
Thu May 17, 2018 6:51 pm
sophie wrote:
Thu May 17, 2018 7:03 am
So besides dualstow, what are all of you doing about bonds?
I've been buying the dip in bonds. I was buying mid caps before that and it's paid off nicely (for now, anyway). Sticking to the plan. Am I alone?
I think you are alone but you may not be wrong.
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Re: The Bond Dream Room

Post by jhogue » Thu May 17, 2018 9:26 pm

I bought TLT when I bought into the HBPP in 2013. Later that year, I converted that ETF to new 30 year Treasuries (original 3.75% coupon) by direct purchase from Fidelity. At the time, the consensus was that “interest rates have nowhere to go but up!” Last I checked, new 30 year Treasury bonds have an interest rate to maturity of about 3.22%. Today, I can’t think of any good reason to sell such a solid performing asset sporting my favorite expense ratio: 0%.

Maybe interest rates will skyrocket tomorrow and my LTTs will crater. I dunno. Seems just as likely that long term deflation will grind away for another decade following a narrative that is invisible today and will only become apparent with the benefit of hindsight.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: The Bond Dream Room

Post by boglerdude » Thu May 17, 2018 10:53 pm

Is there a web page calculator for bond funds

You plug in:
Amount purchased
Fund duration
Rate purchased at
Average interest rate over your holding period of X years ?

And it tells you what you can sell for after X years

I started my PP with EDV in late 2016, yield was 2.33% >:( so if it stays at 3.17% when do I get my money back
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Re: The Bond Dream Room

Post by Dieter » Thu May 17, 2018 11:08 pm

sophie wrote:
Thu May 17, 2018 7:03 am
So besides dualstow, what are all of you doing about bonds?

I stopped auto-investing in long bonds but plan to keep what I have and let the percentage drift down while I keep collecting interest payments. Two things will have to happen before I jump back into buying long bonds: 1) the Fed needs to stop talking about raising rates, and 2) the international investors buying 30 year bonds need to wake up, notice the flat yield curve, and rush into shorter durations.
In my non-PP 401k's, bonds are almost all "cash" now (Prime Money Market in one / a Stable Value Fund in the other). Before making the change was mostly in Total Bond. Reasons for change: didn't like having corporate bonds, only recently have short-term options I like, and yeah, shorten duration to time the market.

In my GB-ish IRA I have 13% target for LTT, ITT, and "cash" (historically short term bond) and basically on target.
* I recently moved VG Short Term Bond to Prime Money Market.

* Planning to increase LTT to 20% to compensate for shortened duration in 401k's / have 'formal' GB LTT allocation (from ITT)
(although hard to do, so we'll see when/if I pull the trigger)

I've been using VGLT since bought first gold in 2012, so my LTT are a little shorter than most as well....

GBish IRA down .8% for the year as of today.
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Re: The Bond Dream Room

Post by Tortoise » Fri May 18, 2018 1:08 am

I’ve been sticking to the traditional PP allocations (4x25 with 15/35 rebalance bands) since 2010, and still am.

I’m boring, but I sleep easy at night.
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Re: The Bond Dream Room

Post by ochotona » Fri May 18, 2018 5:14 am

boglerdude wrote:
Thu May 17, 2018 10:53 pm
Is there a web page calculator for bond funds

You plug in:
Amount purchased
Fund duration
Rate purchased at
Average interest rate over your holding period of X years ?

And it tells you what you can sell for after X years

I started my PP with EDV in late 2016, yield was 2.33% >:( so if it stays at 3.17% when do I get my money back
You possibly don't get your principal back with most bond fund. Only with a bond or bond fund with a fixed maturity date.

Your EDV lost value exactly in the amount to compensate for rising interest rates, the opportunity cost of holding a bond with a lower interest rate. The same kind of actual bond lost exactly the same value, but the fund has no fixed maturity date, so the pain goes on and on.
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Re: The Bond Dream Room

Post by sophie » Fri May 18, 2018 6:51 am

dualstow wrote:
Thu May 17, 2018 7:46 am
sophie wrote:
Thu May 17, 2018 7:36 am
However you're right...I've just joined the "PP hypocrite" club I guess. I'm still keeping enough bonds to be in balance though.
Keeping enough- does that include buying more if it drops below 15%?
I'm at 15% right now.
Yes. I'm at 21%. Bonds dropping to 15% means the yields will have gone up quite a bit - 4% maybe? And, I'm waiting on the opportunity to tax loss harvest.

Budd I'm still sticking with the program. Just ratcheting down the bond-buying during this rare instance of a free lunch: an asset being actively and transparently manipulated to go down in the next couple of years. But, despite what the Fed is trying to do the bond market isn't entirely under its control, so I am not going to reduce my holdings - I'm not quite as brave as dualstow! Also note I'm still auto-investing in gold, which is also in the doghouse at the moment, and in stocks, which are not but have those high valuations that are making everyone nervous. Fortunately the PP keeps grinding along anyway.
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Re: The Bond Dream Room

Post by dualstow » Fri May 18, 2018 8:29 am

pug beat me to it.
I hold corporate bond funds in my vp, and although I feel the psychological comfort of individually held bonds, I could hear a thousand boglehead voices in my ear after that post, ocho. O0
sophie wrote:
Fri May 18, 2018 6:51 am
But, despite what the Fed is trying to do the bond market isn't entirely under its control, so I am not going to reduce my holdings - I'm not quite as brave as dualstow!
--> my edit
not quite as brave chicken-hearted as dualstow!

Thank you for your kindness, anyway. O0
Yeah, I guess my bond share was close to 20% before I sold off some.
What's left is yielding 3.88%, I think, and I will keep that.

Now I just have to decide whether to leave the proceeds in Vanguard Prime MM or buy some 1- or 2-year treasurys.
Last edited by dualstow on Fri May 18, 2018 8:36 am, edited 1 time in total.
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Re: The Bond Dream Room

Post by jhogue » Fri May 18, 2018 10:02 am

dualstow,

If you have a big slug of cash headed for STTs, don't forget to consider sophie's "tax trickery." Just recently, I saw some high coupon (8-9%) 30 year T-bonds maturing in 1-2 years that would be good candidates.
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A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: The Bond Dream Room

Post by dualstow » Fri May 18, 2018 11:06 am

Thank you. I'll definitely take a look!
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Re: The Bond Dream Room

Post by ochotona » Fri May 18, 2018 12:39 pm

You guys are exactly correct, the financial loss from bonds and bond funds is the same when interest rates rise, but somehow the emotional experience is different. That's what I meant when I wrote "the pain goes on and on". With a bond the loss is easier to ignore.
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Re: The Bond Dream Room

Post by sophie » Sat May 19, 2018 7:01 am

ochotona wrote:
Fri May 18, 2018 12:39 pm
You guys are exactly correct, the financial loss from bonds and bond funds is the same when interest rates rise, but somehow the emotional experience is different. That's what I meant when I wrote "the pain goes on and on". With a bond the loss is easier to ignore.
How so?

The capital gain/loss column still applies to individual bonds. The red color is fully visible. I try to remember that it is more than offset by the coupon payments I've been collecting.

The reason to hold bond funds (IMHO) is that you can use them to accumulate contributions, then at some point you switch them to an individual bond. And with a fund, you get that instant gratification of interest payments monthly instead of every 6 months.

jhogue thanks for the pointer to those high interest 30 years! I looked a while ago and didn't see anything, but I wasn't looking to go beyond one year.
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Re: The Bond Dream Room

Post by ochotona » Sat May 19, 2018 7:25 am

I think for some people there is the appeal that "I'm going to get all of my original money back", of course their brain is not tracking the opportunity cost. I hear this alot.
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Re: The Bond Dream Room

Post by dualstow » Wed May 23, 2018 9:49 am

ochotona wrote:
Sat May 19, 2018 7:25 am
I think for some people there is the appeal that "I'm going to get all of my original money back", of course their brain is not tracking the opportunity cost. I hear this alot.
I bought some BIV ( a bond etf) for my wife, some years ago. She does not run a pp.
She’ll get her money back but it would feel strange to sell at a negative, even if non-reinvested dividends end up making her whole.

I’ll let her make the call, but I know that if I had bought, say, 3-year notes, she could just count down to the calendar date when her cash is “released.” Terrible “mental accounting.”
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Re: The Bond Dream Room

Post by buddtholomew » Tue May 29, 2018 11:29 am

Classic...I thought my TLT purchased at 118 was dead money...
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