Zeros for cash?

Discussion of the Cash portion of the Permanent Portfolio

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Kriegsspiel
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Re: Zeros for cash?

Post by Kriegsspiel » Thu Mar 29, 2018 10:38 am

barrett wrote: It looks like VSBSX has an expense ratio of .07%. I THINK that more or less offsets any hit you take by buying smaller lots of T-Bills. For example, when I bought some bills at Fidelity recently, the "list price" in their one-year bill area was 2.13%, but when I hit "depth of book" I ended up getting about 2.06% for my smaller lot (didn't have the $50,000 or $100,000 I needed to avoid that). One can see that actual yield right before hitting the execute trade button.
Yea, that's what I looked at previously (I think it was Xan on the other side of the discussion). I'm fine with paying Vanguard the ER, they can take care of all the details. If the yield on individual bills ever looks attractive vs the yield - ER of VGSH I would just switch back.
To answer Sophie's question, yes, I have started buying one-year bills but won't see what the tax treatment is on them until early 2020 as the first one will mature in early 2019. And by 2020 I will have forgotten to pay attention!
Mr Vacuum wrote:The irony of a clear answer about precise tax treatment of 1 year tbills not yet appearing in this thread amongst analyzers and tweakers is a bit much considering they were Harry Browne’s clear and simple recommendation for one fourth or the portfolio ;)

Indeed, I previously switched from funds to bills in taxable thinking it would mean less capital gains to think about and report since i was not selling but holding to maturity (but apparently didn’t check for sure??). I’ve got some maturing in July, so I’ll see how Fidelity classifies the gains then.
Like I said, at Vanguard when the bill mature, $1,000 is deposited in your settlement fund. Then you buy another bill for $997 or whatever. When it matures, $1,000 in the settlement fund again. When Vanguard spits out your 1099 it will have added up all the interest for you. If you sell them Vanguard calculates your capital gains/loss. Are you guys saying something I'm not getting?
pugchief wrote:
barrett wrote: I do like the idea of having just one cash position in any account, as it's much easier to keep track of than a T-Bill ladder.
How exactly does one track the price of individual treasuries on google sheets? Will google finance pull the value from cuspis?

I am thinking about switching, as IL does not allow for the US Treasury state income tax exemption if they are held thru mutual funds or ETFs. >:(
I was just manually updating the price of the bill in my spreadsheet whenever I calculated my NW. I do that for my individual long bonds too.
sophie wrote:Interesting, I wasn't aware of the reduced yield for small lots of T bills bought at auction.
If you're referring to my comment, that was for bonds bought on the secondary market through Vanguard, not at auction through Treasury Direct.
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Re: Zeros for cash?

Post by dualstow » Thu Mar 29, 2018 11:41 am

barrett wrote:It looks like VSBSX has an expense ratio of .07%. I THINK that more or less offsets any hit you take by buying smaller lots of T-Bills. For example, when I bought some bills at Fidelity recently, the "list price" in their one-year bill area was 2.13%, but when I hit "depth of book" I ended up getting about 2.06% for my smaller lot (didn't have the $50,000 or $100,000 I needed to avoid that). One can see that actual yield right before hitting the execute trade button.
That could very well be, Barrett, that the expense ratio is even worse. Perhaps it's a "the devil you know" situation. Kind of a funny thing to say, coming from someone who buys at auction. O0 I suppose I could do it your way- buy secondary and know the yield. I guess I'm comfortable now, letting VSBSX do its thing, and just adding to it as my T-Bill rungs are redeemed. And, like Kriegs, I could always go back.
Good news everyone: AOC and Maxine Waters are going to oversee Wall Street.
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Re: Zeros for cash?

Post by pugchief » Thu Mar 29, 2018 11:51 am

sophie wrote: Pugchief - don't funds report interest as government vs non, for tax treatment purposes? How does Illinois know whether interest comes from a maturing T bill vs a fund?
Yes, the funds report the source, and the state would have no way of knowing...unless you got audited. The instructions for form IL1040 specifically state that Treasury interest earned 'indirectly' thru a mutual fund or ETF are disallowed. The interest is only deductible if you actually own the individual bonds/bills/notes.
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Re: Zeros for cash?

Post by pugchief » Thu Mar 29, 2018 11:55 am

Edit: Apparently, they changed the law and now allow the pro-rata deduction. Grrr, now I'm going to have to file amended returns for a couple of years.
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Re: Zeros for cash?

Post by Mr Vacuum » Thu Mar 29, 2018 4:29 pm

Kriegsspiel wrote:
Mr Vacuum wrote:The irony of a clear answer about precise tax treatment of 1 year tbills not yet appearing in this thread amongst analyzers and tweakers is a bit much considering they were Harry Browne’s clear and simple recommendation for one fourth or the portfolio ;)

Indeed, I previously switched from funds to bills in taxable thinking it would mean less capital gains to think about and report since i was not selling but holding to maturity (but apparently didn’t check for sure??). I’ve got some maturing in July, so I’ll see how Fidelity classifies the gains then.
Like I said, at Vanguard when the bill mature, $1,000 is deposited in your settlement fund. Then you buy another bill for $997 or whatever. When it matures, $1,000 in the settlement fund again. When Vanguard spits out your 1099 it will have added up all the interest for you. If you sell them Vanguard calculates your capital gains/loss. Are you guys saying something I'm not getting?
Sorry, Kriegs, I missed your post when I wrote that. Or else it didn't compute at first because you said the bills pay interest, while I'm looking at "ZERO CPN" thinking that can't be interest.

Looking at my Fidelity tax info in more detail, I can confirm zero cpn bills listed under "Interest on U.S. Treasury Bonds & Notes" but no capital gains, just as you describe. The bills were a mix of secondary market purchases and auction purchases with maturities of 6 months or less, all but a few held to maturity. Now what I'm not connecting is that even the few bills I sold don't list capital gains--that part doesn't add up.
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Re: Zeros for cash?

Post by barrett » Fri Mar 30, 2018 11:38 am

Mr Vacuum wrote:Looking at my Fidelity tax info in more detail, I can confirm zero cpn bills listed under "Interest on U.S. Treasury Bonds & Notes" but no capital gains, just as you describe. The bills were a mix of secondary market purchases and auction purchases with maturities of 6 months or less, all but a few held to maturity. Now what I'm not connecting is that even the few bills I sold don't list capital gains--that part doesn't add up.
Not a tax expert at all but, I think you may be confusing interest income with capital gains. I believe the interest income on treasuries would be reported as 1099-INT income, and that the tax treatment on that income is dependent on your marginal tax rate for that particular year.

Do I have that right?
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