Gyroscopic Investing

it will be better to check online and that is the only place from where you get the clear picture of it.

Long-term Treasury (TLO) and 10-year Treasury (IEF) both closed below the 200-day moving average today. A bond downtrend is developing. How long it lasts or how deep it goes... who knows?

ochotona wrote:Long-term Treasury (TLO) and 10-year Treasury (IEF) both closed below the 200-day moving average today. A bond downtrend is developing. How long it lasts or how deep it goes... who knows?

It's still above an optimized trend for them, so we'll have to see if we bounce here or we close below the trend. I sure have a knack for timing things wrong when I act on impulsiveness instead of rationality. Never fails to amaze me how the market will then bitchslap you.

MachineGhost wrote:

ochotona wrote:Long-term Treasury (TLO) and 10-year Treasury (IEF) both closed below the 200-day moving average today. A bond downtrend is developing. How long it lasts or how deep it goes... who knows?

It's still above an optimized trend for them, so we'll have to see if we bounce here or we close below the trend. I sure have a knack for timing things wrong when I act on impulsiveness instead of rationality. Never fails to amaze me how the market will then bitchslap you.

MG, you prefer buying when things are up?
If I recall you are DCA'ing into a conservative allocation.
This is part of the plan!

buddtholomew wrote:MG, you prefer buying when things are up?
If I recall you are DCA'ing into a conservative allocation.
This is part of the plan!

I prefer buying when things are in an uptrend it seems. I don't like throwing good money after bad. I didn't DCA into gold for 4 years until the uptrend started. I saved on a lot of loss drag.

The problem with T-Bonds is its not the kind of asset you can safely DCA into when you're at a 5,000 year low in interest rates with central bankers starting to talk about reversing their QEternity B.S. and there's increasing political realization that fiscal policy is going to be necessary to incite the ever dreaded inflation. There's no mere "asset swapping' going on when the government directly pays and employs workers to fix our crumbling infrastructure, etc..

Also, we must not forget that T-Bonds and gold lost money during the last recession. They didn't save the PP from a drawdown and the PP only eeked out a minor calendar year gain because gold recovered at the very last minute.

So yeah, caution is warranted when yellow flags are going up that the T-Bonds uptrend may be ending. I can't understand how or why since a recession looks to be starting, but I try to not argue with the market is deciding to do.

Does that mean you are abandoning the plan?

buddtholomew wrote:Does that mean you are abandoning the plan?

My feeling is I'll wait until either a bounce or a breakdown happens and then reasses the state of the assets. Tight Money could be right around the corner in which case all three assets are gonna bleed like a stuck pig. After today's bad earnings on AA, T-Bonds may recover enough.

I did change one thing. I'm lump-summing the entire month at once instead of by week. Hence my incerased caution.

MachineGhost wrote: After today's bad earnings on AA,

Off-topic: I had a limit order in to sell my Alcoa that I put in just the day before. It did not trigger (it was not a stop loss), so I felt that 10% drop. Should have just sold it all at market last week.

You americans have nothing to complain still
The euro version of TLT (https://www.ishares.com/nl/particuliere ... tf-de-fund) is yielding 0.35% .....

I am not fully invested yet and i need to invest quite a lot of euros......do i have the balls to buy long bonds at 0.35% ........ *vomit*

dutchtraffic wrote:You americans have nothing to complain still
The euro version of TLT (https://www.ishares.com/nl/particuliere ... tf-de-fund) is yielding 0.35% .....

I am not fully invested yet and i need to invest quite a lot of euros......do i have the balls to buy long bonds at 0.35% ........ *vomit*

I sympathize with you, that's quite a tough situation. I hope we don't get to 0.35% long bonds over here.

TLO below 200 day moving average. Long term rates in the USA headed higher,

dutchtraffic wrote:You americans have nothing to complain still

I agree completely.

dutchtraffic wrote:You americans have nothing to complain still
The euro version of TLT (https://www.ishares.com/nl/particuliere ... tf-de-fund) is yielding 0.35% .....

I am not fully invested yet and i need to invest quite a lot of euros......do i have the balls to buy long bonds at 0.35% ........ *vomit*

You're not in bonds for the yield, but capital gains.

dutchtraffic wrote:You americans have nothing to complain still
The euro version of TLT (https://www.ishares.com/nl/particuliere ... tf-de-fund) is yielding 0.35% .....

I am not fully invested yet and i need to invest quite a lot of euros......do i have the balls to buy long bonds at 0.35% ........ *vomit*

Is there any way for you to buy US government bonds? One argument I have read is that you might lose due to currency fluctuations. But the euro would have to appreciate a huge amount against the dollar to make up the difference in rates. And with all due respect, I think that given the political situation in Europe with Merkel's open doors Muslim immigrant policy the chances are the euro will lose ground against the dollar.

edit: I concede that the US political situation is not great but the last go around with Billary in the 90's shows that they are crooks but at least somewhat pragmatic. Unlike Merkel whose policy makes no sense to me.

This may not be the appropriate thread, but I have often wondered how best to hedge a rising dollar as it clearly impacts US denominated investments like gold and oil.

I appreciate that a rising dollar enables me to purchase more abroad, but is it worthwhile to hedge with UUP or other? Is currency fluctuation a wash over time?

MachineGhost wrote:

dutchtraffic wrote:You americans have nothing to complain still
The euro version of TLT (https://www.ishares.com/nl/particuliere ... tf-de-fund) is yielding 0.35% .....

I am not fully invested yet and i need to invest quite a lot of euros......do i have the balls to buy long bonds at 0.35% ........ *vomit*

You're not in bonds for the yield, but capital gains.

Yes, but the lower the yield, the less potential capital gains left.

dutchtraffic wrote:

MachineGhost wrote:

dutchtraffic wrote:You americans have nothing to complain still
The euro version of TLT (https://www.ishares.com/nl/particuliere ... tf-de-fund) is yielding 0.35% .....

I am not fully invested yet and i need to invest quite a lot of euros......do i have the balls to buy long bonds at 0.35% ........ *vomit*

You're not in bonds for the yield, but capital gains.

Yes, but the lower the yield, the less potential capital gains left.

Rates can and have gone negative.
Capital gains are not capped when bonds reach zero.

buddtholomew wrote:

dutchtraffic wrote:

MachineGhost wrote:
You're not in bonds for the yield, but capital gains.

Yes, but the lower the yield, the less potential capital gains left.

Rates can and have gone negative.
Capital gains are not capped when bonds reach zero.

Sure, It's just not very likely to see rates at -8%....

dutchtraffic wrote:

buddtholomew wrote:

dutchtraffic wrote:
Yes, but the lower the yield, the less potential capital gains left.

Rates can and have gone negative.
Capital gains are not capped when bonds reach zero.

Sure, It's just not very likely to see rates at -8%....

Nor at +8%, but I share your concern as well.

dutchtraffic wrote:Yes, but the lower the yield, the less potential capital gains left.

That is false. It's called convexity. Look it up.

Thirty year T-bond yields are up about 0.7% since end of September. Makes we wonder if we're on a long term path back to normalcy. I am a buyer if we get north of 4%, I have Treasuries already, but not long term. Interesting times.

MachineGhost wrote:

dutchtraffic wrote:Yes, but the lower the yield, the less potential capital gains left.

That is false. It's called convexity. Look it up.

From the wiki..... The part where it says "Then it is easy to see" is a hoot.

I have a dilemma a bit like duchtraffic's earlier on in the thread.

I am in Euroland and have a Euro PP and a VP, as well as a high-yield portfolio. Now that I am retired, I have finally accepted that I am not good at speculation. I want to abandon the VP and include its contents in the PP where possible. (The HY port does all right, mainly because I don't trade it!).

Including the VP contents in the PP has essentially meant shoehorning Emerging Market and Japan ETFs and some sector ETFs (Health and Tech) into the PP share allocation, and adding cash. I think this remains a reasonable non-US PP, as the allocation within the share compartment is now Europe 57%, EM 14%, Japan 14%, Health and Tech 15%. I have exposure to the US in the HY shares, so I won't add any US shares here for the moment.

The resulting PP is now 26-18-30-26% shares-long bonds-gold-cash. It is within rebalance limits, but I would like to maintain a straight 4x25 PP, so should add some bonds to the 18%. However, as discussed in this thread, this does not seem like a good time to buy bonds, particularly long bonds. So I would be grateful for opinions on how and when to go about topping up the bonds. For example:
- do nothing until a rebalancing band is hit
- buy bonds but not long bonds: intermediate bonds for example, to reduce duration and risk
- grit teeth and buy long bonds anyway in normal PP fashion
- do a partial top-up, using intermediate or long bonds
- wait for the Fed announcement on interest rates next week and buy bonds when the smoke has cleared
- or other suggestion?

A high-yield portfolio (31% of total) and a permanent portfolio (57%) and a savings account (12%) are perhaps not such a bad combination. But the HY portfolio could be cut in half in the next market crash. After (re)reading extensively on this forum and elsewhere, I aim to slowly incorporate all my investments including the HY shares and the cash savings account into the PP, but that is perhaps a subject for another thread.

Long bonds in the PP worked very well in recent years in countering market dips. I am still reluctant to add to my long bonds at the moment because of the risk of rising rates.

I did a comparison of two PPs in Portfolio Visualizer, a conventional PP with long bonds and another with intermediate bonds replacing long bonds, 5/25% rebalancing. To my surprise, there was little difference between them, and the difference depended on the period examined. For 1972-2016, the long bond version wins by a small margin. CAGRs and MaxDDs are virtually identical with differences of a fraction of a percent. For 1972-1990, the intermediate bond version wins, again by a small margin. In recent years, the long bond version performs better, beating the intermediate version's CAGR by about half a percentage point in 2000-2016.

So although I understand the theory that long bond volatility is a counterbalance to stock and gold volatility, I conclude that in practice, intermediate bonds have historically worked just as well. So why be exposed to the interest rate risk of long bonds if they provide no consistent extra return? Or is there something I am not getting here?

(PP with long bonds and 5/25% rebal 1972-2016: CAGR 8.55%, MaxDD -13.40%. Intermediate bonds 8.32% and -12.95%. Inflation-adjusted. Sharpe 0.51 in both cases.)

I noticed this also.