How do you invest the Cash portion?

Discussion of the Cash portion of the Permanent Portfolio

Moderator: Global Moderator

User avatar
seajay
Executive Member
Executive Member
Posts: 430
Joined: Mon Aug 09, 2021 11:11 am

Re: How do you invest the Cash portion?

Post by seajay » Tue Aug 24, 2021 7:17 am

Equally valid PP cash/bond (treasury) options are IMO : T-Bill/20 year Treasury barbell, 50% 10 year treasury fund, 50% 10 year ladder .... and with the ladder not marked to marked the yearly gains are approximately the average of the 10 year yields. So for 2021 2.154% year end gain.

Historic year end 10 year yields from the FRED ...

Code: Select all

	Year end 10 year
1962	3.85
1963	4.14
1964	4.21
1965	4.65
1966	4.64
1967	5.70
1968	6.16
1969	7.88
1970	6.50
1971	5.89
1972	6.41
1973	6.90
1974	7.40
1975	7.76
1976	6.81
1977	7.78
1978	9.15
1979	10.33
1980	12.43
1981	13.98
1982	10.36
1983	11.82
1984	11.55
1985	9.00
1986	7.23
1987	8.83
1988	9.14
1989	7.93
1990	8.08
1991	6.71
1992	6.70
1993	5.83
1994	7.84
1995	5.58
1996	6.43
1997	5.75
1998	4.65
1999	6.45
2000	5.12
2001	5.07
2002	3.83
2003	4.27
2004	4.24
2005	4.39
2006	4.71
2007	4.04
2008	2.25
2009	3.85
2010	3.30
2011	1.89
2012	1.78
2013	3.04
2014	2.17
2015	2.27
2016	2.45
2017	2.40
2018	2.69
2019	1.92
2020	0.93
Review/rebalance you PP as and when a bond matures. Rolling some funds into another 10 year Treasury.
User avatar
Kriegsspiel
Executive Member
Executive Member
Posts: 4052
Joined: Sun Sep 16, 2012 5:28 pm

Re: How do you invest the Cash portion?

Post by Kriegsspiel » Thu Aug 26, 2021 7:27 am

The intermediate treasury funds have the duration of a 15% LTT 35% STT PP, riding the cusp of the rebalancing bands. Not an orthodox PP, but probably not the worst thing in the world.
You there, Ephialtes. May you live forever.
User avatar
vnatale
Executive Member
Executive Member
Posts: 9422
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: How do you invest the Cash portion?

Post by vnatale » Wed Sep 01, 2021 3:24 pm

vnatale wrote:
Wed Dec 04, 2019 7:29 pm

Many months ago I talked to Vanguard brokerage regarding buying Treasury bills through them.

Since they are notes it'd be great if any of you experienced with buying them through Vanguard can correct anything I'm not correctly interpreting from my notes.

1) No fees to buy them.

2) Maximum term - 12 months

3) For 1 month, 2 month, 3 month, 6 months Treasury Bills there are weekly auctions whereby you get to bid 3 days in advance

4) For 1 year Treasury Bills there are monthly auctions whereby you get to bid 4 days in advance

5) If buying on the secondary market you can buy any time from 8 AM to 5 PM, Monday to Friday.

In my entire life my own bond purchases have been via just two bond funds, both of which I still have. I have never purchased an individual bond so this is all new to me.

In addition to correcting anything I have mis-stated above, I'd love to hear as many specifics as possible regarding your Treasury Bill buying with Vanguard.

Since I will be going "pure" Permanent Portfolio I'm not interested in anything but Treasury Bills in the form of bond purchases to constitute the "Cash" portion of the Permanent Portfolio. Nothing longer than a year. No non-Treasury Bills, any other money market funds, or CDs. Given my overall situation, I'm placing a HIGH premium on safety with NO need to try to get small extra %'s greater than the Treasury Bill rates.

Vinny


Looking through the the remaining 5+ pages of posts in this topic I don't see that anyone every responded to this one of mine.

Is anyone able to do so now?

Currently I have all my investments with Vanguard....though I suspect that when I FINALLY go FULL Permanent Portfolio that I may put half of it with Fidelity.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
User avatar
dualstow
Executive Member
Executive Member
Posts: 14229
Joined: Wed Oct 27, 2010 10:18 am
Location: synagogue of Satan
Contact:

Re: How do you invest the Cash portion?

Post by dualstow » Wed Sep 01, 2021 3:31 pm

Hmm, I used to buy T-Bills directly, but I got lazy. I still buy bond and notes, but with rates being so low, I ended up going back to Vanguard's Treasury Money Market fund, which is what I started with in the first place. Haven't bought t-bills for a while.

There were never any fees.
I don't remember the schedule. I would often look it up. I don't miss that.
RIP Marcello Gandini
User avatar
vnatale
Executive Member
Executive Member
Posts: 9422
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: How do you invest the Cash portion?

Post by vnatale » Wed Sep 01, 2021 3:35 pm

Kbg wrote:
Tue Jul 09, 2019 9:23 am

I think "cash" needs to be quickly available. What is quick enough is up to the individual. While I have lots of T-Bills I manage monthly on T-Direct, it's also lots of work. I think at some point errors from mistakes resulting from an aging brain could exceed any advantage of DIY. Small bits of cash lying around from the discount to the maturity value of the bond are also a pain in the butt and means I'm not investing the "max" I could be.

Broken record spins again...simplicity is of value and perhaps worth paying for.


Understand what you mean in regards to an "aging brain".

Do you have an age range in mind for when you think this could happen to you and an age range which would cover the majority of Americans?
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
User avatar
vnatale
Executive Member
Executive Member
Posts: 9422
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: How do you invest the Cash portion?

Post by vnatale » Wed Sep 01, 2021 3:38 pm

dualstow wrote:
Wed Sep 01, 2021 3:31 pm

Hmm, I used to buy T-Bills directly, but I got lazy. I still buy bond and notes, but with rates being so low, I ended up going back to Vanguard's Treasury Money Market fund, which is what I started with in the first place. Haven't bought t-bills for a while.

There were never any fees.
I don't remember the schedule. I would often look it up. I don't miss that.


With the goals of being a Permanent Portfolio purest....I don't like a lot of freedom and holdings that have allowed by Vanguard's Treasury Money Market fund (which I currently DO have ALL my cash holdings in).

Thus I'm convinced from reading in this topic and other topics that I want to be buying the T-Bills directly.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
User avatar
Smith1776
Executive Member
Executive Member
Posts: 3501
Joined: Fri Apr 21, 2017 6:01 pm

Re: How do you invest the Cash portion?

Post by Smith1776 » Wed Sep 08, 2021 6:27 pm

vnatale wrote:
Wed Sep 01, 2021 3:38 pm
dualstow wrote:
Wed Sep 01, 2021 3:31 pm
Hmm, I used to buy T-Bills directly, but I got lazy. I still buy bond and notes, but with rates being so low, I ended up going back to Vanguard's Treasury Money Market fund, which is what I started with in the first place. Haven't bought t-bills for a while.

There were never any fees.
I don't remember the schedule. I would often look it up. I don't miss that.
With the goals of being a Permanent Portfolio purest....I don't like a lot of freedom and holdings that have allowed by Vanguard's Treasury Money Market fund (which I currently DO have ALL my cash holdings in).

Thus I'm convinced from reading in this topic and other topics that I want to be buying the T-Bills directly.
That’s what was specified in Craig and Tex’s PP book I believe.

I’m currently holding an ETF that holds high interest bank cash.

Close enough. 🤷‍♂️
I still find the James Rickards portfolio fascinating.
User avatar
vnatale
Executive Member
Executive Member
Posts: 9422
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: How do you invest the Cash portion?

Post by vnatale » Wed Sep 08, 2021 7:39 pm

Smith1776 wrote:
Wed Sep 08, 2021 6:27 pm

vnatale wrote:
Wed Sep 01, 2021 3:38 pm

dualstow wrote:
Wed Sep 01, 2021 3:31 pm

Hmm, I used to buy T-Bills directly, but I got lazy. I still buy bond and notes, but with rates being so low, I ended up going back to Vanguard's Treasury Money Market fund, which is what I started with in the first place. Haven't bought t-bills for a while.

There were never any fees.
I don't remember the schedule. I would often look it up. I don't miss that.


With the goals of being a Permanent Portfolio purest....I don't like a lot of freedom and holdings that have allowed by Vanguard's Treasury Money Market fund (which I currently DO have ALL my cash holdings in).

Thus I'm convinced from reading in this topic and other topics that I want to be buying the T-Bills directly.


That’s what was specified in Craig and Tex’s PP book I believe.

I’m currently holding an ETF that holds high interest bank cash.

Close enough. 🤷‍♂️


For a purist that is far from close enough. For the cash holding...safety is paramount with return not a goal.

Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
User avatar
Smith1776
Executive Member
Executive Member
Posts: 3501
Joined: Fri Apr 21, 2017 6:01 pm

Re: How do you invest the Cash portion?

Post by Smith1776 » Wed Sep 08, 2021 10:05 pm

vnatale wrote:
Wed Sep 08, 2021 7:39 pm

For a purist that is far from close enough. For the cash holding...safety is paramount with return not a goal.
We unfortunately don't have better options in Canada. All of our short term government bond funds have at least a few years duration risk. There's no 30 day T-bill funds.

Bank balances are government insured, so I feel reasonably safe.
I still find the James Rickards portfolio fascinating.
User avatar
vnatale
Executive Member
Executive Member
Posts: 9422
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: How do you invest the Cash portion?

Post by vnatale » Wed Sep 08, 2021 11:00 pm

Smith1776 wrote:
Wed Sep 08, 2021 10:05 pm

vnatale wrote:
Wed Sep 08, 2021 7:39 pm


For a purist that is far from close enough. For the cash holding...safety is paramount with return not a goal.


We unfortunately don't have better options in Canada. All of our short term government bond funds have at least a few years duration risk. There's no 30 day T-bill funds.

Bank balances are government insured, so I feel reasonably safe.


Yes. Different circumstances in Canada than the United States.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
User avatar
vnatale
Executive Member
Executive Member
Posts: 9422
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: How do you invest the Cash portion?

Post by vnatale » Thu Sep 09, 2021 11:39 am

sophie wrote:
Sun Dec 15, 2019 9:35 am

Kbg wrote:
Sat Dec 14, 2019 11:49 pm

I never understood the bonds in tax advantaged accounts thing and particularly Roths. I’d much rather shelter higher growth rates and pay taxes on lower growth items unless one is going to buy and hold for a really long time on something that doesn’t pay a dividend like BRK stock.


I've flipped around quite a bit on this and would love to trigger a discussion. My favorite investment for tax-deferred accounts is cash, followed closely by bonds, then gold. "Deep" gold is best in taxable, followed by stocks. I try to maximize stocks in the Roth and HSA.

I made these choices with 2 goals in mind. First, tax-deferred accounts will eventually get slammed by ordinary income tax rates, so you want to make sure you're not trading that for a preferred tax rate (i.e. the capital gains rate). Second, a dollar's growth in a Roth IRA is worth a lot more than a dollar of growth in a tax deferred account. While I can't predict which asset will increase the most in the short term, over time spans of 10-15 years or more I am pretty confident that cash and bonds will underperform stocks. Basically, I want my tax-deferred accounts to shrivel up and die while my Roth skyrockets.


Was the subsequent discussion generated here enough for you? If not, I'd, of course, love to read others thoughts on this on my way to finally concluding which camp I believe holds the most merits for my given situation.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
User avatar
vnatale
Executive Member
Executive Member
Posts: 9422
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: How do you invest the Cash portion?

Post by vnatale » Thu Sep 09, 2021 11:47 am

sophie wrote:
Tue Dec 17, 2019 8:21 am

Kbg, I suspect we all have access to the information we need to optimize tax strategy. I wouldn't expect that a financial planner would be any better at that than you are. Professionals are not incentivized to spend lots of time figuring out complexities, they'll tend to use simple one size fits all rules.

Developing a spreadsheet simulator to estimate taxes AFTER retirement would be dead useful. iORP is the closest thing to an online source, but it seems to make some simplistic assumptions. It always wants you to spend every taxable penny and Roth convert your entire 401K before taking SS.

In addition to dealing with marginal tax brackets in retirement, here's the fiscal parameters I know about (in part thanks to this board):

top of 12% tax bracket - limit for avoiding taxes on qualified dividends and capital gains
Saver's credit (< age 65)
Obamacare (< age 65) - 4x poverty level.
Medicare premiums - (> age 65) - don't remember what the threshold is.
(if you live in NY) - $85,000 income for enhanced STAR rebate, $50,000 income for SCHE (rebate of 50% of property taxes) (> age 65)

Any to add to this?


That is an impossible task for someone who would have been like me.

Starting Medicare at age 65...still working with a fairly high taxable income...and trying to manage income so as to not get tagged with additional Medicare premium due from having too high an income.

I delayed as long as possible taking Social Security until I finally did this year at age 70. But there was no room in those 65 to 70 years to do any Roth conversions.

Since I'm only getting 7 months of Social Security this my first year...there may possibly be some room for Roth conversions this year. But maybe not if that is going to cause more of my Social Security income to be taxed because then I can only view it as an additional tax on the Roth conversions.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
pp4me
Executive Member
Executive Member
Posts: 1190
Joined: Wed Apr 29, 2020 4:12 pm

Re: How do you invest the Cash portion?

Post by pp4me » Fri Sep 17, 2021 4:16 pm

vnatale wrote:
Thu Sep 09, 2021 11:47 am
Starting Medicare at age 65...still working with a fairly high taxable income...and trying to manage income so as to not get tagged with additional Medicare premium due from having too high an income.
Say what? I assume you are talking about part B which I have not started yet because I'm still insured through my wife. It goes up if you're income is too high? I'll have to actually read that booklet they send out every year.
vnatale wrote:
Thu Sep 09, 2021 11:47 am
I delayed as long as possible taking Social Security until I finally did this year at age 70. But there was no room in those 65 to 70 years to do any Roth conversions.
I didn't do any Roth conversions either but I did manage to sell VTI in a taxable account during the delay and buy my wife a new Honda CRV to drive to work without any capital gains tax.
User avatar
vnatale
Executive Member
Executive Member
Posts: 9422
Joined: Fri Apr 12, 2019 8:56 pm
Location: Massachusetts
Contact:

Re: How do you invest the Cash portion?

Post by vnatale » Sat Sep 18, 2021 5:13 am

pp4me wrote:
Fri Sep 17, 2021 4:16 pm

vnatale wrote:
Thu Sep 09, 2021 11:47 am

Starting Medicare at age 65...still working with a fairly high taxable income...and trying to manage income so as to not get tagged with additional Medicare premium due from having too high an income.


Say what? I assume you are talking about part B which I have not started yet because I'm still insured through my wife. It goes up if you're income is too high? I'll have to actually read that booklet they send out every year.

vnatale wrote:
Thu Sep 09, 2021 11:47 am

I delayed as long as possible taking Social Security until I finally did this year at age 70. But there was no room in those 65 to 70 years to do any Roth conversions.


I didn't do any Roth conversions either but I did manage to sell VTI in a taxable account during the delay and buy my wife a new Honda CRV to drive to work without any capital gains tax.


You can read about it here: https://thefinancebuff.com/medicare-irm ... ckets.html
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
User avatar
mathjak107
Executive Member
Executive Member
Posts: 4456
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: How do you invest the Cash portion?

Post by mathjak107 » Tue Nov 02, 2021 4:19 am

Ironically if the money market fund managers think the debt ceiling won’t be raised short term treasuries can go from short supply to no supply .

Since most money markets have these instruments due in 7 days there can be liquidity issues in treasury money markets and supply issues since they are restricted to what they can buy .

The fed would likely use repos to keep things going as that is their main tool but since the money markets pp users like to use money markets that don’t use repos the irony is they can be at greater risk then those that do .

While few money markets have actually broken the buck I had mine fail in 2008 and we lost about 3% when Lehman paper turned toxic .

I doubt the ceiling won’t be raised but it is an interesting conundrum how risk can shift and what was considered safer can be actually riskier
barrett
Executive Member
Executive Member
Posts: 1982
Joined: Sat Jan 04, 2014 2:54 pm

Re: How do you invest the Cash portion?

Post by barrett » Mon Mar 14, 2022 9:15 am

For those of you who have been using a Treasury Only Money Market Fund for cash in the era of zero interest rates, are you now going back to laddering short term Treasuries? If so, of what length? Three months? One year? I realize that investors would still be locking in real losses with this strategy, but it's at least better than accepting zero nominal return on the cash quadrant. jhogue? Anyone else?
User avatar
jhogue
Executive Member
Executive Member
Posts: 755
Joined: Wed Jun 28, 2017 10:47 am

Re: How do you invest the Cash portion?

Post by jhogue » Mon Mar 14, 2022 12:59 pm

barrett wrote:
Mon Mar 14, 2022 9:15 am
For those of you who have been using a Treasury Only Money Market Fund for cash in the era of zero interest rates, are you now going back to laddering short term Treasuries? If so, of what length? Three months? One year? I realize that investors would still be locking in real losses with this strategy, but it's at least better than accepting zero nominal return on the cash quadrant. jhogue? Anyone else?
I used to have a ladder of one year and shorter term T-bills, but not any more. I sold them off over several years to fund I-bond purchases and my TMMF. I currently hold a rough balance of half FDLXX (Fidelity's Treasury money market fund) and half I-bonds.

I currently like I-bonds (a lot!), but for tax purposes I would not want to be forced to sell them to meet a re-balance so I hold I-bonds (always tax deferred) in taxable and FDLXX in tax deferred accounts. I-bonds currently have more yield than a TMMF, but a TMMF has more liquidity than I-bonds. That's why I prefer to hold some of each. This works for me, but I can see how others might want a different mix depending on their own circumstances.
“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!"
User avatar
seajay
Executive Member
Executive Member
Posts: 430
Joined: Mon Aug 09, 2021 11:11 am

Re: How do you invest the Cash portion?

Post by seajay » Wed Mar 16, 2022 7:57 pm

Ad Orientem wrote:
Wed Aug 07, 2019 7:40 pm
Image
I'm not sure why, but I tend to sleep better with my feet slightly elevated.
:)

But others might sleep better with some gold under the mattress to balance out the cash :)

Since 2009 (to end of 2021), after rates had collapsed to very low levels due to the 2008 financial crisis, had you done a Larry twist, shifted some of bond (cash) risk over to the stock side, increased stock to 30%, stuffed the remainder 20% cash under the mattress, then you'd have outrun the straight 4x25 by 0.7% annualized. If instead you took 15% of the 25% cash, stuffed 10% under the mattress and upped the other three assets by 5% to 30% weightings each, then you'd have outrun the PP by 1.25% annualized. On those measures that could be mentally accounted as having had 25% cash yield 2.8% to 5% more than T-Bills despite having 20%/10% of cash stuffed under the mattress.

The risks, as in yearly losses, were in the same ballpark for all three. 2015 for instance had both 4x25 and 30/25/25 stock/gold/LTT with 20 under the mattress both enduring a -3% loss, whilst the 30/30/30 (10 under mattress) endured a -3.5%.

Data sourced from PV
User avatar
jhogue
Executive Member
Executive Member
Posts: 755
Joined: Wed Jun 28, 2017 10:47 am

Re: How do you invest the Cash portion?

Post by jhogue » Thu Mar 17, 2022 11:16 am

People have funny ideas about what to do with their cash. Some times not so funny.

I wonder where Putin hides his personal stash. I am sure he has got at least one, but I am not sure if he can get to any of them.

See:
"Swiss banks count cost of Russia sanctions"

https://www.swissinfo.ch/eng/swiss-bank ... _content=o
“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!"
Post Reply