Do T-Bills Keep Up with Inflation?

Discussion of the Cash portion of the Permanent Portfolio

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jalanlong
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Re: Do T-Bills Keep Up with Inflation?

Post by jalanlong » Mon Feb 03, 2020 5:49 pm

This discussion brings up my recent thoughts of just going all Treasury Bills or cash. My grandfather lived a sort of Dave Ramsey existence. He never borrowed money, never had credit cards and paid cash for all of his vehicles. The amount of interest he saved over his lifetime must have been staggering. That allowed him to have a very comfortable retirement despite never making more than $60k in any given year. He never invested in "the market", only kept his money in cash and cds. Of course he never had to deal with Central Bank ZIRP either.

I sometimes wonder if I go that route and concentrate on minimizing debt and expenses if I can just put my money in a basic cash management account (currently paying 1.80%) and forget about it and never have to worry about markets again. Maybe have a few gold coins on the side. I know a lot of people here say the PP gives them peace of mind. But I still worry. What if bonds AND stocks go down? What if my ETF goes bust? What if there is a market freeze ala 9/11 and I cannot reach my money for quite a time. So many ridiculous scenarios I worry about!
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Re: Do T-Bills Keep Up with Inflation?

Post by dualstow » Mon Feb 03, 2020 6:33 pm

Tyler wrote:
Mon Feb 03, 2020 3:06 pm
dualstow wrote:
Sun Feb 02, 2020 10:35 am
Have they generally kept up? If yes, do you think they will continue to do so?
T-bills don't always outpace inflation, but for the most part they manage it quite well. And it's true in lots of different currencies. Check out the charts here: https://portfoliocharts.com/2017/05/12/ ... -investor/

That said, it's true that we're in a period when T-bills are struggling to keep up. How long that will last is anyone's guess, but my long-term bet is on T-bills continuing to act like monetary buoys that keep your purchasing power afloat.
Ah, thank you. I’ve read that entry before, but I definitely need a refresh!
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Re: Do T-Bills Keep Up with Inflation?

Post by dualstow » Mon Feb 03, 2020 6:37 pm

jalanlong wrote:
Mon Feb 03, 2020 5:49 pm
This discussion brings up my recent thoughts of just going all Treasury Bills or cash. My grandfather lived a sort of Dave Ramsey existence. He never borrowed money, never had credit cards and paid cash for all of his vehicles. The amount of interest he saved over his lifetime must have been staggering. ...
I can understand someone shunning credit cards if they actually paid interest on them in the past. For me it’s a foreign concept. Credit cards = the bank gives me free loans, one month at a time, and gives me cash back for paying them back on time at the end of the month, interest-free.

The Savor card gives me 4% back on restaurants and tickets. That’s so high, I sometimes think I’m better off spending than saving while this deal lasts. O0

T-Bills: I’ll have to give some thought to jhogue’s advice to shorten the duration. I’ve never gone shorter than six months. Maybe the treasury money market is best, but I just abandoned that this year to get back into t-bills.
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Re: Do T-Bills Keep Up with Inflation?

Post by boglerdude » Mon Feb 03, 2020 11:14 pm

Savor has annual fee to overcome...by spending more.
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Re: Do T-Bills Keep Up with Inflation?

Post by dualstow » Tue Feb 04, 2020 7:19 am

boglerdude wrote:
Mon Feb 03, 2020 11:14 pm
Savor has annual fee to overcome...by spending more.
Only for newcomers. There was no fee for early signers, and they sent us a letter saying it will stay that way.
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Re: Do T-Bills Keep Up with Inflation?

Post by jhogue » Wed Feb 19, 2020 4:58 pm

dualstow wrote:
Mon Feb 03, 2020 6:37 pm
jalanlong wrote:
Mon Feb 03, 2020 5:49 pm
This discussion brings up my recent thoughts of just going all Treasury Bills or cash. My grandfather lived a sort of Dave Ramsey existence. He never borrowed money, never had credit cards and paid cash for all of his vehicles. The amount of interest he saved over his lifetime must have been staggering. ...
I can understand someone shunning credit cards if they actually paid interest on them in the past. For me it’s a foreign concept. Credit cards = the bank gives me free loans, one month at a time, and gives me cash back for paying them back on time at the end of the month, interest-free.

The Savor card gives me 4% back on restaurants and tickets. That’s so high, I sometimes think I’m better off spending than saving while this deal lasts. O0

T-Bills: I’ll have to give some thought to jhogue’s advice to shorten the duration. I’ve never gone shorter than six months. Maybe the treasury money market is best, but I just abandoned that this year to get back into t-bills.
dualstow,
Shifting to a shorter maturity in T-bills seems to be working out pretty well right now. Today, with the 1 year T-bill at 1.50%, a 6 month T-bill goes for 1.54% and a 3 month T-bill goes for 1.56%. All you have to do is buy, hold, and repeat (just be sure to check the yield curve at Fidelity before you pull the trigger.)

https://fixedincome.fidelity.com/ftgw/f ... Selected=H
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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: Do T-Bills Keep Up with Inflation?

Post by dualstow » Wed Feb 19, 2020 5:17 pm

Thanks! I’ve been buying 6-month bills at Vanguard.
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Re: Do T-Bills Keep Up with Inflation?

Post by jhogue » Thu Feb 20, 2020 12:29 pm

This morning, Bloomberg News correspondents declared that this was the "buy everything" market.

Almost, but not quite true.

Cash is the out of favor asset, thanks to years of pummeling by the Fed. It is difficult to get an inflation-adjusted positive return from anything without taking an outsized risk.
“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: Do T-Bills Keep Up with Inflation?

Post by dualstow » Thu Feb 20, 2020 1:29 pm

jhogue wrote:
Thu Feb 20, 2020 12:29 pm
This morning, Bloomberg News correspondents declared that this was the "buy everything" market.
...
In another thread, kriegs said something like "enjoy this everything bubble," which makes me want to run to cash. O0
So far, resisting, but deploying new capital has me scratching my head. Easy to just follow the asset % for someone else's portfolio, but not when I take care of my own.
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Re: Do T-Bills Keep Up with Inflation?

Post by mathjak107 » Fri Feb 21, 2020 2:50 am

after tax returns tend to fall behind a lot more. they are just to close to falling behind without taxes so once you calculate taxes it gets worse
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Re: Do T-Bills Keep Up with Inflation?

Post by dualstow » Fri Feb 21, 2020 4:47 am

mathjak107 wrote:
Fri Feb 21, 2020 2:50 am
after tax returns tend to fall behind a lot more. they are just to close to falling behind without taxes so once you calculate taxes it gets worse
You’re in a much higher tax bracket. And in another thread (which probably belongs here and not the Bond section) it was pointed out that you get a break on state taxes. viewtopic.php?f=3&t=10408&p=186101&hili ... vs#p186090

I don’t know why I don’t like TIPS but, I don’t like TIPS.
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Re: Do T-Bills Keep Up with Inflation?

Post by mathjak107 » Fri Feb 21, 2020 5:23 am

the problem with tips is they are still bonds and go down when rates rise , plus one other factor .

they are linked to just a pice change index , not a personal cost of living index .all our cost of living is very very different from each other .

if tips are way off from your personal cost of living which they will be there is no slack in the income .

i rather use an income fund like fidelity strategic real return if i wanted to protect against inflation and did not want stocks or a real growth vehicle.

don't forget , the cpi only takes the temperature of the 1500 mini economies that make us up via price changes .

a personal cost of living is based on what we buy and the price change , plus how many times do we buy it x some quality factor since higher priced goods tend to see more price inflation and last longer ..

also we tend to sub way out of bounds . like i will buy sugar free pudding if my no suger added klondicks are not on sale .

millions live in rent stabilized housing with rents capped , some like my sister refinanced and her over all bills are now less then years ago , on the other hand we rent .

seniors tend to be less effected as they age because while we tend to age the go go years turn in to the slow go years whch turn in to the no go years .

so what we no longer do or buy tends to cancel out increases in what we do . then in the 80's health care ramps up .

so tracking a cpi is not a proxy for what goes on in our personal cost of living .
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