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Re: How do you invest the Cash portion?

Posted: Tue May 12, 2020 6:48 pm
by Kriegsspiel
sophie wrote:
Tue May 12, 2020 7:51 am
WSJ had a piece a few days ago about how the mortgage market is about to run into serious problems. Watch out for municipal bonds, mortgage backed securities, repurchase agreements, junk bonds etc. Which is what Ally is probably using to give you that interest rate.

T bills and Treasury money markets for me, at least until all this settles out. We could see another 2008 frozen-credit event - not saying it will happen just that it might.
I've been reading similar stuff.

But I can see why ocho is so blasé about it. Collect your higher interest rate, then if the bank goes under, you'll get your money anyways through the FDIC. It's almost like you only win if you DO go with the highest interest rate savings accounts. Unless FDIC fails, like because tons of people are unemployed because of a government lockdown, and they're drawing down their bank accounts... but I really don't know enough about it to do anything but speculate.

Re: How do you invest the Cash portion?

Posted: Sun May 31, 2020 5:04 am
by Hal
What are your thoughts on putting cash into senior floating rate bonds rather than unsecured bank deposits?
Eg: https://www.betashares.com.au/fund/aust ... e-bond-etf

Unfortunately there are no Australian Treasury note ETF's and while there is an FDIC equivalent, it is totally unfunded (ex-post). It is also at the discretion of the Minister if the insurance is to be activated.

All thoughts welcome.

ps: Some history https://www.theage.com.au/national/vict ... 5232x.html

Re: How do you invest the Cash portion?

Posted: Sun May 31, 2020 6:09 am
by mathjak107
Kriegsspiel wrote:
Tue May 12, 2020 6:48 pm
sophie wrote:
Tue May 12, 2020 7:51 am
WSJ had a piece a few days ago about how the mortgage market is about to run into serious problems. Watch out for municipal bonds, mortgage backed securities, repurchase agreements, junk bonds etc. Which is what Ally is probably using to give you that interest rate.

T bills and Treasury money markets for me, at least until all this settles out. We could see another 2008 frozen-credit event - not saying it will happen just that it might.
I've been reading similar stuff.

But I can see why ocho is so blasé about it. Collect your higher interest rate, then if the bank goes under, you'll get your money anyways through the FDIC. It's almost like you only win if you DO go with the highest interest rate savings accounts. Unless FDIC fails, like because tons of people are unemployed because of a government lockdown, and they're drawing down their bank accounts... but I really don't know enough about it to do anything but speculate.
it should be money that you can wait for . in the even of failure you may have to wait to get paid .. it took more than 2 months to get our money out of a money market when it broke the buck and was locked. we did lose about 2.50% in that event .

Re: How do you invest the Cash portion?

Posted: Sun May 31, 2020 12:10 pm
by jhogue
Right now, cash is starting to remind of all the complaints about gold.
But-- just like gold-- when you really need it, you want access to it right now and you want it in the safest form you can get.

Re: How do you invest the Cash portion?

Posted: Sun Jul 05, 2020 9:21 pm
by jalanlong
https://www.gsam.com/content/gsam/us/en ... r-etf.html

Right now I use this ETF for all of the cash in my PP. Anyone think that is a bad idea?

Re: How do you invest the Cash portion?

Posted: Mon Jul 06, 2020 2:54 am
by mathjak107
if you think rates will rise t-bills can be best . but if you think rates will fall , a t-bill etf like shv or very short term fund like shy etf is better , since they rise as rates fall more . why not split the cash portion .

Re: How do you invest the Cash portion?

Posted: Fri Aug 20, 2021 3:45 pm
by vnatale
ochotona wrote:
Tue Dec 03, 2019 7:03 pm

I-Bonds cannot break the zero bound. This is big f deal. Retail depositors in Europe are now being charged to keep their money in the bank.


In the light of our recent discussions regarding the advantages / disadvantages of iBond investing.....the above is an important one to keep in mind....

Re: How do you invest the Cash portion?

Posted: Sun Aug 22, 2021 3:54 pm
by vnatale
tomfoolery wrote:
Sun Aug 22, 2021 3:43 pm

vnatale wrote:
Mon Oct 07, 2019 8:07 pm

As I just stated, if my belief that an income producing investment such as cash belongs in a retirement account then that eliminates any I bonds as Treasury Direct does not work with retirement accounts.

Since you are with both Vanguard and Fidelity and use do autoroll at Fidelity can you verify that Vanguard does not seem to offer the autoroll feature. When I talked to them a short while ago about the mechanics of buying bills and bonds they did not seem to bring up the autoroll feature. It seemed like it was all up to the investor to do it manually.

And, again, if I'm going by the pure prescription of owning cash from Tex's and Craig's book, which I believe to be 100% Treasury / one year then it seems the best options are Vanguard's US Treasury money market fund or buying various T-Bills which have maturities no longer than a year. In this area I am definitely prizing ultimate safety over any form of yield improvement. Therefore, that would seem to basically eliminate your first and third third, leaving only your middle third.





T-bills are definitely the way to go! The Treasury MMF has non-treasury obligations in it!


That is where I currently have all my Vanguard cash in...when I completed doing so in March 2020.

Since then the holdings have deteriorated with what they have now allowed the fund to hold.

Re: How do you invest the Cash portion?

Posted: Sun Aug 22, 2021 4:27 pm
by jhogue
tomfoolery wrote:
Sun Aug 22, 2021 3:43 pm
vnatale wrote:
Mon Oct 07, 2019 8:07 pm
As I just stated, if my belief that an income producing investment such as cash belongs in a retirement account then that eliminates any I bonds as Treasury Direct does not work with retirement accounts.

Since you are with both Vanguard and Fidelity and use do autoroll at Fidelity can you verify that Vanguard does not seem to offer the autoroll feature. When I talked to them a short while ago about the mechanics of buying bills and bonds they did not seem to bring up the autoroll feature. It seemed like it was all up to the investor to do it manually.

And, again, if I'm going by the pure prescription of owning cash from Tex's and Craig's book, which I believe to be 100% Treasury / one year then it seems the best options are Vanguard's US Treasury money market fund or buying various T-Bills which have maturities no longer than a year. In this area I am definitely prizing ultimate safety over any form of yield improvement. Therefore, that would seem to basically eliminate your first and third third, leaving only your middle third.


T-bills are definitely the way to go! The Treasury MMF has non-treasury obligations in it!
FDLXX, Fidelity's Treasury money market fund, does not have any non-treasury obligations.

Re: How do you invest the Cash portion?

Posted: Tue Aug 24, 2021 7:17 am
by seajay
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.

Re: How do you invest the Cash portion?

Posted: Thu Aug 26, 2021 7:27 am
by Kriegsspiel
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.

Re: How do you invest the Cash portion?

Posted: Wed Sep 01, 2021 3:24 pm
by vnatale
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.

Re: How do you invest the Cash portion?

Posted: Wed Sep 01, 2021 3:31 pm
by dualstow
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.

Re: How do you invest the Cash portion?

Posted: Wed Sep 01, 2021 3:35 pm
by vnatale
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?

Re: How do you invest the Cash portion?

Posted: Wed Sep 01, 2021 3:38 pm
by vnatale
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.

Re: How do you invest the Cash portion?

Posted: Wed Sep 08, 2021 6:27 pm
by Smith1776
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. 🤷‍♂️

Re: How do you invest the Cash portion?

Posted: Wed Sep 08, 2021 7:39 pm
by vnatale
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.


Re: How do you invest the Cash portion?

Posted: Wed Sep 08, 2021 10:05 pm
by Smith1776
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.

Re: How do you invest the Cash portion?

Posted: Wed Sep 08, 2021 11:00 pm
by vnatale
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.

Re: How do you invest the Cash portion?

Posted: Thu Sep 09, 2021 11:39 am
by vnatale
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.

Re: How do you invest the Cash portion?

Posted: Thu Sep 09, 2021 11:47 am
by vnatale
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.

Re: How do you invest the Cash portion?

Posted: Fri Sep 17, 2021 4:16 pm
by pp4me
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.

Re: How do you invest the Cash portion?

Posted: Sat Sep 18, 2021 5:13 am
by vnatale
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

Re: How do you invest the Cash portion?

Posted: Tue Nov 02, 2021 4:19 am
by mathjak107
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

Re: How do you invest the Cash portion?

Posted: Mon Mar 14, 2022 9:15 am
by barrett
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?