The Bond Dream Room

Discussion of the Bond portion of the Permanent Portfolio

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ochotona
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Re: The Bond Dream Room

Post by ochotona » Thu Sep 05, 2019 3:03 pm

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pugchief
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Re: The Bond Dream Room

Post by pugchief » Thu Sep 05, 2019 7:05 pm

Why would you hold them for 20 years? If rates rise above 4%, would you still hold, just to get the 3.53%? If you need the cash, you're screwed at 0.1% And if rates don't rise, but you forget to cash them in in exactly 20 years, you net return drops by the day. Only the author and JHogue* think these are worth buying. ;D



*Hogue, just messing with you.
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ochotona
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Re: The Bond Dream Room

Post by ochotona » Thu Sep 05, 2019 10:14 pm

Japanification, that's why.
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jhogue
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Re: The Bond Dream Room

Post by jhogue » Fri Sep 06, 2019 9:40 am

The key question for potential EE bond investors this:

Do you have a 20 year plan for your money? If you don’t, then you should never buy EE bonds. If you do have a 20 year plan (or longer), then EE bonds might have a useful role in your portfolio.

Pugchief’s worry that rates may rise above 4.00% reminds me of the warnings I got from “professional” financial advisors not to buy 30 year T bonds when I shifted to the HBPP back in 2013: The conventional wisdom then—and now too—was that interest rates "have no place to go but up!"
“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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ochotona
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Re: The Bond Dream Room

Post by ochotona » Fri Sep 06, 2019 10:47 am

Given my age, I can only really buy $30,000 of these things, I own none now. 2019, 2020, 2021 then I turn 60 in 2021. I don't mind betting on really low inflation risk with less than 2% of my portfolio. If I'm wrong, no great harm done. If the 30 year goes stays at 2%, I'm happy. It'll just be more deep cash.
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pugchief
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Re: The Bond Dream Room

Post by pugchief » Fri Sep 06, 2019 12:47 pm

jhogue wrote:
Fri Sep 06, 2019 9:40 am
The key question for potential EE bond investors this:

Do you have a 20 year plan for your money? If you don’t, then you should never buy EE bonds. If you do have a 20 year plan (or longer), then EE bonds might have a useful role in your portfolio.

Pugchief’s worry that rates may rise above 4.00% reminds me of the warnings I got from “professional” financial advisors not to buy 30 year T bonds when I shifted to the HBPP back in 2013: The conventional wisdom then—and now too—was that interest rates "have no place to go but up!"
I never said I was worried that rates would rise. I have no idea if they will go up or down. But 4% is not out of the realm of serious potential. So is 1%. Either way, I think EEs are a pointless waste. But to each his own.
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Re: The Bond Dream Room

Post by jhogue » Fri Sep 06, 2019 4:23 pm

I certainly do not consider EE bonds to be “a pointless waste.” A couple of specific, real world examples:

1. The EE bonds we used to pay for our daughter’s college back in 2007-2011 paid 6% p.a. and were both federal tax free and tax deferred. The accumulated interest was also exempt from all state and local taxes. Considering how badly the stock market crashed in 2008-2009, I was pretty happy with our EE bonds’ return ON principal as well as their return OF principal.

2. The current crop of EE bonds, which will return 3.53% if held for 20 years, were first offered in 2003. They achieve their doubling effect less than four years from now in 2023. I see no indication that those who invested in EE bonds then are unhappy with their performance now. Indeed, with 10 years currently at 1.55%; 20 years at 1.83%; and 30 year T bonds hovering around 2.00%, if anything, EE bond investors are a pretty smug bunch right now.

EE bonds are just another tool in the financial toolbox. You just have to make sure you are using the right tool for the right job.
Last edited by jhogue on Mon Oct 14, 2019 9:03 am, edited 1 time in total.
“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: The Bond Dream Room

Post by dualstow » Fri Sep 06, 2019 5:27 pm

I’m glad for this thread. i have a bunch of these that I’m supposed to redeem and i keep putting it off and forgetting about them. I-bonds, too.
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jhogue
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Re: The Bond Dream Room

Post by jhogue » Fri Sep 06, 2019 7:39 pm

You are welcome.

And fortunately we have pugchief around to keep us on our toes by keeping up to date on our US savings bonds, which, quite literally, have no place to go but up.

It sort of reminds me of the children's story "The Little Engine That Could":
Starting out is a lot of "I think I can... I think I can... I think I can...." To be finally followed by "I knew I could... I knew I could... I knew I could...."
“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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Smith1776
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Re: The Bond Dream Room

Post by Smith1776 » Sat Sep 07, 2019 12:53 am

lol and there's me: the Canadian.

I REALLY feel left out when reading these conversations about EE bonds, I bonds, and the like.

I read these threads and I'm just like "What are these dudes going on about anyway???" :D
“On balance, the financial system subtracts value from society.”
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pugchief
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Re: The Bond Dream Room

Post by pugchief » Sat Sep 07, 2019 7:42 am

jhogue wrote:
Fri Sep 06, 2019 7:39 pm
You are welcome.

And fortunately we have pugchief.
Man, if you would have just stopped typing here, you would have been right on target. :D
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Kriegsspiel
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Re: The Bond Dream Room

Post by Kriegsspiel » Sat Sep 07, 2019 7:50 am

;D smithers you probably know more about US government debt than 90% of Americans. The varieties of bonds aren't too complicated, it's the tax considerations and where you can buy them that are confusing.
I hated all the things I had toiled for under the sun, because I must leave them to the one who comes after me. Who knows whether that person will be wise or foolish? Yet they will have control over all the fruit of my toil into which I have poured my effort and skill under the sun. . . Nothing is better for a man than to eat and drink and enjoy his work.
- Ecclesiastes
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