The Bond Dream Room

Discussion of the Bond portion of the Permanent Portfolio

Moderator: Global Moderator

User avatar
Cortopassi
Executive Member
Executive Member
Posts: 1242
Joined: Mon Feb 24, 2014 2:28 pm
Location: Illinois

Re: The Bond Dream Room

Post by Cortopassi » Wed Jun 13, 2018 9:32 am

ochotona wrote:
Wed Jun 13, 2018 6:11 am
DoubleLine thinks 10 year going to 6% in a few years. Oil to $90. Recession risk 2020.
Then I will quit the PP and put everything into CDs... :)
User avatar
ochotona
Executive Member
Executive Member
Posts: 2151
Joined: Fri Jan 30, 2015 5:54 am

Re: The Bond Dream Room

Post by ochotona » Wed Jun 13, 2018 12:33 pm

Cortopassi wrote:
Wed Jun 13, 2018 9:32 am
ochotona wrote:
Wed Jun 13, 2018 6:11 am
DoubleLine thinks 10 year going to 6% in a few years. Oil to $90. Recession risk 2020.
Then I will quit the PP and put everything into CDs... :)
Me too!
User avatar
pugchief
Executive Member
Executive Member
Posts: 2426
Joined: Tue Jun 26, 2012 2:41 pm
Location: suburbs of Chicago, IL

Re: The Bond Dream Room

Post by pugchief » Wed Jun 13, 2018 12:56 pm

ochotona wrote:
Wed Jun 13, 2018 12:33 pm
Cortopassi wrote:
Wed Jun 13, 2018 9:32 am
ochotona wrote:
Wed Jun 13, 2018 6:11 am
DoubleLine thinks 10 year going to 6% in a few years. Oil to $90. Recession risk 2020.
Then I will quit the PP and put everything into CDs... :)
Me too!
You are both liars. The only way 10y is going to 6% is if inflation is over 5%. Unlikely. And if it is, you will still want the PP.
User avatar
dualstow
Executive Member
Executive Member
Posts: 7467
Joined: Wed Oct 27, 2010 10:18 am
Location: next to emotional support peacock
Contact:

Re: The Bond Dream Room

Post by dualstow » Wed Jun 13, 2018 1:03 pm

Good point, pug. Well, the Fed just raised rates.
Stay tuned to my sig line for any breaking news. O0
🚜
de-fang the snake, said my filipino kali instructor. Shortly after that, he hit me in the head with a rattan stick.
— Desert, 2016 (Nomad clothing thread)
Dieter
Executive Member
Executive Member
Posts: 231
Joined: Sat Sep 01, 2012 10:51 am

Re: The Bond Dream Room

Post by Dieter » Wed Jun 13, 2018 2:01 pm

If 10yr to 6% I might have a hard time reballancing into LTT....
User avatar
Tortoise
Executive Member
Executive Member
Posts: 1087
Joined: Sat Nov 06, 2010 2:35 am

Re: The Bond Dream Room

Post by Tortoise » Wed Jun 13, 2018 10:49 pm

pugchief wrote:
Wed Jun 13, 2018 12:56 pm
The only way 10y is going to 6% is if inflation is over 5%. Unlikely. And if it is, you will still want the PP.
Aren’t rising home prices, medical expenses, and college tuition a form of inflation?
User avatar
ochotona
Executive Member
Executive Member
Posts: 2151
Joined: Fri Jan 30, 2015 5:54 am

Re: The Bond Dream Room

Post by ochotona » Thu Jun 14, 2018 4:58 am

Tortoise wrote:
Wed Jun 13, 2018 10:49 pm
pugchief wrote:
Wed Jun 13, 2018 12:56 pm
The only way 10y is going to 6% is if inflation is over 5%. Unlikely. And if it is, you will still want the PP.
Aren’t rising home prices, medical expenses, and college tuition a form of inflation?
And rising asset prices?
User avatar
pugchief
Executive Member
Executive Member
Posts: 2426
Joined: Tue Jun 26, 2012 2:41 pm
Location: suburbs of Chicago, IL

Re: The Bond Dream Room

Post by pugchief » Thu Jun 14, 2018 2:20 pm

Tortoise wrote:
Wed Jun 13, 2018 10:49 pm
pugchief wrote:
Wed Jun 13, 2018 12:56 pm
The only way 10y is going to 6% is if inflation is over 5%. Unlikely. And if it is, you will still want the PP.
Aren’t rising home prices, medical expenses, and college tuition a form of inflation?
Not if you are the US government and want to keep Social Security increases to a minimum.
User avatar
eufo
Executive Member
Executive Member
Posts: 243
Joined: Mon Dec 05, 2016 7:17 pm

Re: The Bond Dream Room

Post by eufo » Mon Jun 25, 2018 4:49 pm

Yay for bonds today! Lol
Don't agree with me too strongly or I'm going to change my mind
User avatar
ochotona
Executive Member
Executive Member
Posts: 2151
Joined: Fri Jan 30, 2015 5:54 am

Re: The Bond Dream Room

Post by ochotona » Tue Jun 26, 2018 1:27 pm

Schwab thinks yields may've peaked on the long end, though the short end may keep going up.

https://www.schwab.com/resource-center/ ... off-lights

"Duration outlook

We have favored keeping the average duration in portfolios in the short-to-intermediate range to mitigate the negative impact of rising rates. Now that longer-term yields have reached 3%, we’ve debated suggesting investors start to add some duration to portfolios. However, we aren’t quite ready to make that call. The economy is growing at a healthy pace and inflation expectations, which are central to bond yields, are still rising. In addition, the Treasury’s borrowing needs are rising due to the tax and spending bills passed earlier in the year, while the Fed is simultaneously reducing its buying, leaving more to be financed in the market.

Until there are signs of slower growth or rising risk aversion, we continue to favor maintaining average portfolio duration in the short to intermediate term, but we’re getting closer to a stage in the business cycle where modestly extending the average duration will begin to look more attractive. For now, the risk/reward trade-off in the yield curve looks most attractive in the two- to five-year range."

Great minds think alike, I was wondering the same myself recently.
User avatar
Cortopassi
Executive Member
Executive Member
Posts: 1242
Joined: Mon Feb 24, 2014 2:28 pm
Location: Illinois

Re: The Bond Dream Room

Post by Cortopassi » Tue Jun 26, 2018 1:43 pm

Here's what I'm thinking lately. As we've discussed, you can't take individual allocations in a vacuum, or you might drive yourself nuts watching one or more go down, seemingly forever (bonds and gold anyone???).

If you stick by Harry's original 25/25/25/25, and the 10%/40% rebalancing bands, here's the pain that must be endured, assuming you rebalanced at the beginning of the year and are waiting for a 10% band (40% drop). This assumes the other allocations in the portfolio have held steady.

Gold, 1/1/2018: ~$1312/oz.
--40% drop to reach rebalance band, gold would need to hit $787
TLT, 1/1/2018: ~125.50/sh
--40% drop to reach rebalance band, TLT would need to hit $75.30

When I look at those numbers, I'm not entirely sure the PP would save me from myself, which worries me. I cannot imagine gold dropping to $787. And pulling the trigger to buy at that level, while logically seems a no-brainer, I'm sure at the time would seem like lighting cash on fire.
User avatar
ochotona
Executive Member
Executive Member
Posts: 2151
Joined: Fri Jan 30, 2015 5:54 am

Re: The Bond Dream Room

Post by ochotona » Tue Jun 26, 2018 2:01 pm

My what big rebalancing bands you have. Where did 10/40 come from ?
Post Reply