Gyroscopic Investing

sophie wrote: The idea that bonds could become more volatile as yields drop lower never occurred to me, but it makes sense when you think about the price/yield relationship being a ratio rather than a linear correlation.

That's assuming market participants are more sensitive to the quoted yield (long-term return) than they are to the quoted price of the bonds (immediate principal amount paid or received). I'm skeptical. I would think as rates drop, volatility of principal should tend to stay the same while the swings in yield get smaller.

It would be great to see some empirical data on this!

atrchi wrote: It would be great to see some empirical data on this!

If things keep going the way they are, you're going to get your data. Be careful what you wish for!

Lone Wolf wrote: I think that MT is right on when he says that the LT bond game becomes a game of ping pong at the very low yields.  I just wish that I had ever seen the Permanent Portfolio play such a game of ping-pong before so that I could say definitively whether or not "it got game". 

Oh, it got game. It got mad game.

Gumby wrote: They dug up the best of the best blown interest rate calls over the past few years. Jim Rogers, Marc Faber, Bill Gross, Nassim Taleb, and many others make a nice appearance in the Bonus section too...

Never trust anyone wearing and suit and a tie.  They're appearing slick for a reason.

moda0306 wrote: What bothers me isn't the idea of rates rising, so much as the certainty behind it.  I can respect any argument that at least takes an honest look at possible outcomes.

The real problem is all of these doom porners are just farting Dixie out of their ass.  They have no concept of MMR and no real clue about modern economics.  At least Krugman appropriates MMR concepts as his own rather than be stubbornly obstinate.

Lone Wolf wrote: Anyone ballsy enough to make the "interest rates have nowhere to go but down" counter-call?

Sure, that's easy!  Rates will continue to go down in our uncertain global economy up until that point in time the velocity for money increases, by the end of this decade.

MachineGhost wrote: Never trust anyone wearing and suit and a tie.  They're appearing slick for a reason.

I knew there was a reason I'm not a Baptist.

MachineGhost wrote: Sure, that's easy!  Rates will continue to go down in our uncertain global economy up until that point in time the velocity for money increases, by the end of this decade.

Very good.  Looking forward to seeing how this all goes.

So on June 1st, 30-year rates were at 2.53%.  (Today they were at 2.56%).  Considering that this is fast falling to the inflation rate, I find all of this quite amazing to watch.  The idea of 30-years offering negative real yields is such a weird notion.

murphy_p_t wrote: i've taken profits off LTT some months ago & out of EDV a few days ago...so I'm running this close to the 15% band...expecting a correction before I increase allocation...kind of market timing, I know....anyone else trying something similar?

I kind of did the opposite, though obviously not because of any foresight. I had lightly overbought treasuries in the past by buying blocks of ten at auction in Vanguard when I could have bought something more equal to my cash or gold shares by using the secondary market.

I'm tempted to buy even more treasuries since gold and stocks move together way too often. I'd probably get burned, though.

As I said on page 2, I wouldn't own any long bonds if it weren't for the pp. I'm so grateful.

2.45% today on the US Treasury Long Bond...The markets aren't predictable!

2.8% for a 30 yr Treasury? That is absolutely nuts!

So glad I decided to inch my way into the PP over a 2 year period, primarily because I was concerned about the ridiculously low yield for LTTs in 2011.

"I just wish that I had ever seen the Permanent Portfolio play such a game of ping-pong before so that I could say definitively whether or not "it got game"."

Exactly!  I've never seen anyone play the game of Russian Roulette either, but I'm sure I don't ever want to! The gun sometimes wins.

Lone Wolf wrote:

Tortoise wrote: Coincidentally, the yield at which the max downside first begins to exceed the max upside is 2.7%--which just so happens to be the yield we're at. Time to put our thinking caps on.

Great analysis.  This is why I don't want yields to go any lower -- I just don't like that yawning void to the downside, no matter how strong the forces pulling yields down seem to be.

I think that MT is right on when he says that the LT bond game becomes a game of ping pong at the very low yields.  I just wish that I had ever seen the Permanent Portfolio play such a game of ping-pong before so that I could say definitively whether or not "it got game".  :)

Seems like bonds have dropped like a rock in the last few days, while the market is mostly flat.  What gives?

Ad Orientem wrote: 2.8% for a 30 yr Treasury? That is absolutely nuts!

Not anymore. 30 year Treasuries are now yielding 3.71% and the 10 yr is around 2.74%! Has the bond bubble burst? Or is this just a suckers rally in stocks that's causing a temporary correction in bonds before the next leg down in yields?

Lone Wolf wrote: I had to rebalance into 30-year bonds earlier this month when they were yielding 2.95%.  I felt like such a sucker having to do that.

Look at em now.  Crazy stuff.

Keep in mind, of course, there will come a day when this asset just won't seem to be able to stop stinking up the joint.  It's the nature of the beast.  Looks like that day ain't today, though.

Looks like we hit that point! 

With the Bernank keeping short term rates near zero for the next couple of years (allegedly), how high can the yield on the 30 year go before something snaps?  I was unable to find a site that showed yield spreads of short term vs. long term treasuries over time.  What I found was a spread of around 4.5 on the high side to inverted on the low side.  We could have a little ways to go with long term yields, but how far before investors start buying LTT"s with short term at or near zero?  Does anyone have any information on this or does it make any difference?

I believe that the Bernanke will try to "normalize" rates before he leaves office so as not to leave the dirty work to his successor. This could mean more pain for treasury investors ahead.

http://kingworldnews.com/kingworldnews/ ... tdown.html


LTT making some serious moves recently...it will be interesting to see how this plays out.

I think that we will hit 4.25-4.5% on the 30 year before we head back down.

MediumTex wrote: I think that we will hit 4.25-4.5% on the 30 year before we head back down.

FWIW, In recent memory, I recall that MT has usually been right about these types of predictions. I for one cannot wait to buy some 30-year treasuries at 4.25%. I'll probably also pick up some munis for my VP at 6 or 7%.

MediumTex wrote: I think that we will hit 4.25-4.5% on the 30 year before we head back down.

I have a hard time imagining how it will get that high. Stock market seems weak and Fed will step back in if it falters. Unemployment is not budging and seems to be getting worse again. Id love to see something above 4, but Id be surprised if it goes that high. Although, the bastards at Goldman Sachs seem to be predicting such numbers.

I sold the last of my EDV shares today. I just feel better owning real treasuries that I can hold to maturity if I panic.

MediumTex wrote: I think that we will hit 4.25-4.5% on the 30 year before we head back down.

M.T.

What does TLT sell for if we get 4.25% or 4.5%?  I am guessing but does $90.00 sound right?

dualstow wrote: I sold the last of my EDV shares today. I just feel better owning real treasuries that I can hold to maturity if I panic.

Do you need to provide a notarized statement saying that is why you are holding to maturity?