The Bond Dream Room

[dualstow]

I think if you backtest the PP using 10-year Treasuries instead of 30-year Treasuries, there is not a whole lot of difference in the results.

They would only go in the vp. I don't mess with the core.

[ochotona]

The MIDDLE part of the yield curve is taking it in the shorts based on 1-year momentum.

[ochotona]

[eufo]

What is the conclusion of those 2 charts? That although the yield is about to break out to the upside, relative to stocks they are still a good buy?

I'm wondering the same thing.

I feel a great temptation to tweak my holdings, which almost always means... I shouldn't. Lol.

[ochotona]

What is the conclusion of those 2 charts? That although the yield is about to break out to the upside, relative to stocks they are still a good buy?

The author just wanted to tweak people who were going to ditch bonds, I think. The point is that you may be relatively safer in bonds than stocks. So stocks down 80%, bonds down 40%. Win?

These ratio charts are interesting, but they are ratios - they don't say anything about absolute levels. Like the gold-silver ratio. About 80 now. Well, it could revert to 50 if gold went to 850 and silver 17, but I doubt anyone would be celebrating.

[buddtholomew]

At some point a PP investor will have to purchase LTT’s to restore the AA to 4x25 or a variant thereof. I’m interested to know who among us plans to rebalance into LTT’s?

[sophie]

I'll be facing that Rubicon soon. My LTTs have dropped below 20% and cash is above 30% (new contributions).

The increase in interest rates of 30 year bonds the last couple of days has actually made me lean toward buying. So far, I think I'll be rebalancing into gold and bonds as per schedule. But, I will wait to do that until a band has been crossed. We'll see. I may need some encouragement when the time comes!

[buddtholomew]

Just the comfort I needed to follow the plan...soon.
Like Sophie I am slightly under 20% LTT’s but mentally preparing myself to rebalance on or near 15% when the time comes. I may invest more frequent, lower amounts as it requires less gumption than larger sums, less often.

Funny just a blink ago we were wondering whether LTT’s provided enough downside protection. I speculate they now meet that criteria.

[drumminj]

I’m interested to know who among us plans to rebalance into LTT’s?

I just did, to a degree. Felt the itch and was at about 30% stocks so sold 10% of my holdings and rebalanced into LTT, cash, and gold.

I'll admit it hurts to see LTT going down right after the rebalance (feel a bit better with stocks having dropped considerably below my sell point!), but I don't profess to know which way the markets are going to move so being back at ~4x25 is as good as any other bet.

Do I wish I had just gone to cash/let it sit in 13-week treasuries for a while? Sure

[Tortoise]

Lest we forget that LTTs sometimes help to smooth out stock volatility even on a daily basis, here are today's returns:

Market close, 03/27/2018:
S&P 500: -1.73%
TLT: +1.07%

[stuper1]

No, you don't seem to understand. Unless the PP as a whole is in positive territory every day, then it's not working properly as advertised. It's all or nothing. Either LTTs and gold always go up more than stocks go down on each and every day, or else forget about it, I'm going back to bogleheads or active trading.

[Tortoise]

If only the Ratchet Portfolio (only up, never down) actually existed!

[dualstow]

Hey, I like the new avatar, Tortoise.

[Tortoise]

Thanks, dualstow!

By the way, I’ve always wondered — what’s the story behind your handle?

[dualstow]

Well, it was going to be an anagram, then became the initials of the four assets:

d
au for gold
long (bonds)
st for short term (bonds)
ow --> dow (jones)

So convoluted that it took me a while to remember the 'ST' above. I kept thinking "sto..." stocks?
I remember settling on that because I liked the word "dual", referring to "pp+vp" and "stow": stash your assets.
In the end, it looks vaguely like some eastern European surname. (shrug)

[Tyler]

I always pictured this.

[dualstow]

I always pictured this.

https://www.picclickimg.com/00/s/MTAzMV ... ALL-_1.jpg

Actually, you know what? That's it.
Never mind what I wrote above.

[Tortoise]

This is the first image returned by Google images when I search for "dual stow":



But yeah, the guns are cooler.

[dualstow]

Well guys, and ladies,

I sold a bunch of my long bonds this morning at a bit above breakeven. Don't copy me, as nuanced thought did not come into play here.
If long bonds soar in price this year or next, I'll be happy about the ones I held onto. But, I don't think I would have made a significant amount of money by holding onto all of them.
It's been a nice run collecting the 3+% interest and knowing that I could hold on until I hit retirement age. And, I know that these bonds are for protection, not yield.

However:
- Some of these bonds are due to be sold in a few years anyway, per Harry's rule. They would have had only 20 years left on them.
- Despite what I said above about protection, it bothers me that new 10-years are earning nearly as much interest as my 30's.
- If we go into a Japan-style deflationary period, I'll get through it without these instruments.

So I'll have a smaller pp. No biggie.

[ochotona]

That yield curve is getting flat from 7 to 20 years. It's a tough time for a bond investor. Very emotional and confusing.

My Dream Story for bonds would be to get some 10 years at 4%, then buy junk bonds on sale during next recession.

[buddtholomew]

DS, how does this change your allocation?
Where did the sale proceeds go?

If you don’t mind.

[sophie]

Well guys, and ladies,

I sold a bunch of my long bonds this morning at a bit above breakeven. Don't copy me, as nuanced thought did not come into play here.
If long bonds soar in price this year or next, I'll be happy about the ones I held onto. But, I don't think I would have made a significant amount of money by holding onto all of them.
It's been a nice run collecting the 3+% interest and knowing that I could hold on until I hit retirement age. And, I know that these bonds are for protection, not yield.

However:
- Some of these bonds are due to be sold in a few years anyway, per Harry's rule. They would have had only 20 years left on them.
- Despite what I said above about protection, it bothers me that new 10-years are earning nearly as much interest as my 30's.
- If we go into a Japan-style deflationary period, I'll get through it without these instruments.

So I'll have a smaller pp. No biggie.

Interesting move, dualstow. How much of your PP bonds did you sell and what percentage are you at now? And what would you do with the proceeds if you kept them in the PP?

My PP is now in Golden Butterfly range, which would allow gold & bonds to get as low as 15%. Not there yet. I'm not motivated to do anything drastic right now because I expect the long, slow slide in long bond prices will be counterbalanced by coupon payments. I do have a slug of bonds in taxable though, and will tax-loss harvest them at some point. However, I have a monthly auto-invest into FLBIX (long treasury fund) and wondering about stopping that until the Fed is done raising rates.

[dualstow]

how does this change your allocation?
Where did the sale proceeds go?

... How much of your PP bonds did you sell and what percentage are you at now? And what would you do with the proceeds if you kept them in the PP?

Budd, Soph (what light through yonder window breaks? )

The short answer is that the allocation is way out of whack right now. It was a little under 40% of my 30-year bonds that I sold/am selling. I'm in a holding pattern right now. I know Harry never advised this, but I want to see where interest rates go from here. I'd be happy to buy long bonds in the future, but not right now.

And, I have no desire to sell gold or anything else to even things out. I'm just going to let the proceeds sit in Vanguard's prime money market fund until they return to long bonds or one of the other pp assets.

[buddtholomew]

how does this change your allocation?
Where did the sale proceeds go?

... How much of your PP bonds did you sell and what percentage are you at now? And what would you do with the proceeds if you kept them in the PP?

Budd, Soph (what light through yonder window breaks? )

The short answer is that the allocation is way out of whack right now. It was a little under 40% of my 30-year bonds that I sold/am selling. I'm in a holding pattern right now. I know Harry never advised this, but I want to see where interest rates go from here. I'd be happy to buy long bonds in the future, but not right now.

And, I have no desire to sell gold or anything else to even things out. I'm just going to let the proceeds sit in Vanguard's prime money market fund until they return to long bonds or one of the other pp assets.

Nothing wrong with that at all.
Have you considered calculating your fixed income duration across LTT’s and Cash?
You may find a new anchor point you are comfortable with so that you are mentally more confident of the approach.

[dualstow]

I'm not going to worry about the duration because even though my allocations are off -- not just bonds and overall duration but now asset allocation as well -- I still own high quality instruments. Save for a few crazy stocks, I have holdings that I am fine with long term.

By the end of 2018 I'll see how 2- and 10-year rates are and then will take a good look at my avg duration.
(10-year because I like to compare it to stocks and 2-year because I might just pile into them).