Gyroscopic Investing

It looks to be up about .55% right now, with long term treasuries leading the way (of course).

The PP just loves all of this market uncertainty.

To quote Forrest Gump, the PP and uncertainty go together like peas and carrots.

MediumTex wrote: It looks to be up about .55% right now, with long term treasuries leading the way (of course).

You saw the LT bonds thing coming?  I really didn't.  I thought gold would be out in front (not that it has done badly, by any means!)

Lone Wolf wrote:

MediumTex wrote: It looks to be up about .55% right now, with long term treasuries leading the way (of course).

You saw the LT bonds thing coming?  I really didn't.  I thought gold would be out in front (not that it has done badly, by any means!)

“The best kept secret in the investing world: Almost nothing turns out as expected.”? - Harry Browne

Ok I'll be honest, my dad hates "cash" and low-returning instruments of any kind, so I had to modify his PP WAY out of any kind of MM fund or SHY or SHV... he liked the zig/zag of the other 3 assets, though.

I thought he was going to get a bit of a smacking.  I thought for sure LTT's would rise in yield with the looming crisis... more as an indication of future default risk than of actual near-term default (obviously wouldn't be any time soon).

The mechanics of all this are extremely interesting to me, and my dad's portfolio is doing GREAT (I have some, but 1) he has a lot more, and 2) I'm more worried about his with that being his source of income.

It's nice to see his aversion to short-term low-yielding bonds/cash aren't hurting him.

Overheard at the Jim Rogers' household:

Woman's Voice: Honey, maybe you could just ride your motorcycle more and stay away from the treasury market completely.

Man's Voice: I AM a terrible market timer.  Why didn't I listen to myself?

It's really interesting how the media keeps grabbing onto the debt ceiling/default story. The bond market has shown that it really does not give two craps about it.

moda:
I have reflected on cash in the context of the PP too. I think it is the least necessary of the four, but I still hold it.

Without fed manipulation, interest rates would move up because of desire to take more risk (stocks outperform) or because of increased inflation expectations (gold outperforms). In this fed absent framework, gold and stocks provide decent hedging to the ill effects of rising interests.

However, the fed has the ability to raise interest rates even in the absence of these scenarios. This is probably a mistake on their part, but it can happen. When they make this mistake, cash is the best asset class to own.

I think the three way split is still a damn fine portfolio though. Kudos for getting him that far  :)

Would the treasury "default" on a Money Market account if push came to shove?

Does that make it any different than a bond?

Isn't any interest-bearing instrument in effect a bond and not "savings" because you're not really saving money if you're letting someone else use it and earning interest.

You make a good distinction.

I really think of a money market as just an extremely short term bond fund. The maturity is so short, that the price of the bond very rarely declines.

The fact that the price of the underlying bonds rarely declines makes it practical to label the instrument "cash."

I think you are prudent to make a distinction, but I am very confident in the solvency of the US government (printing press) so I am comfortable treating it as savings.

A money market that is not Treasuries is a way different story... 

moda0306 wrote: Would the treasury "default" on a Money Market account if push came to shove?

I may be misunderstanding your meaning, but do you mean a Money Market account that invests strictly in Treasury securities?  Are you wondering whether Treasury would default on a T-bill, T-note, or T-bond?  To that question I'd say no under almost any conceivable set of circumstances.

moda0306 wrote: Isn't any interest-bearing instrument in effect a bond and not "savings" because you're not really saving money if you're letting someone else use it and earning interest.

That's a very different definition from savings than the one I've always used.  It seems like that would only apply to money buried in a jar in the yard, wouldn't it?  Even money in a bank can be lent out (and earns interest.)

When the Austrians talk about the importance of savings in a society, they generally assume that a lot of the savings can or will be lent out to others.  The interest rate in facts coordinates the market between savers and borrowers, with the interest rate defining the "price" is willing to pay to make use of the saver's money.

If LTT's prove to be the savior of this debt-ceiling crisis, I will officially state on this board and elseware that I know absolutely nothing, and that the mysteries of the PP are too deep to comprehend.

Just goes to show... the more you learn, the less you know.

LW,

I meant a treasury MM account... that you attempt to cash out on... would they "default" on that?

Also, I was referring to the fact that there is always some default risk out there.  Unless you keep money in that jar, it's the equivalent of a bond in that you could go knock on the door of the bank that you thought would give it to you and there is nobody there.

moda0306 wrote: I meant a treasury MM account... that you attempt to cash out on... would they "default" on that?

I don't own a Treasury MM (I hold T-bills and notes directly) so forgive me if I butcher the mechanics here.  But my understanding is that a Treasury Money Market is just a money market fund created by an investment house (like American Century).  What is special about these funds is that they only hold fairly short-term Treasury securities rather than other stuff like MBSs, commercial paper, etc.

The two parties that could default in this case are the investment house or the Treasury itself.  The investment house would default if somehow they were unable to sell their securities because the market for Treasury securities had somehow seized up.  (Hard to see how this happens.)  The Treasury would default if it quit paying these T-bills back as they matured (pretty much inconceivable to me.)

So were you thinking the investment house would run into some kind of problem or that the Treasury would do something really crazy?

I guess I assumed treasury MM accounts were actually administered by the treasury and weren't an investment house involvement.

It surprises me that running something through an investment house would have been reccommended by HB rather than owning some ultra-short bonds outright.

moda0306 wrote: It surprises me that running something through an investment house would have been reccommended by HB rather than owning some ultra-short bonds outright.

Yeah, I imagine that this was largely down to convenience.  The tedium of rolling over a lot of very short-term bonds by hand would probably get old and cut against that very nice PP trait of requiring very little maintenance.

I do like to check mine once per month but it's more like visiting an old friend than anything else.

I wonder whether these Treasury MM funds allow you to write checks against them?  No doubt this comes in handy.  Their very high expense ratios (.45%-.75% IIRC) are just too much for me, though.

Lone Wolf wrote: I wonder whether these Treasury MM funds allow you to write checks against them?  No doubt this comes in handy.  Their very high expense ratios (.45%-.75% IIRC) are just too much for me, though.

Vanguard's treasury MM allows check writing.

It will open back up some day.

moda0306 wrote: I guess I assumed treasury MM accounts were actually administered by the treasury and weren't an investment house involvement.

No.. LW's got it right. The brokerage houses take the expense ratio as payment for working to keep the NAV at $1.

MediumTex wrote:

Lone Wolf wrote: I wonder whether these Treasury MM funds allow you to write checks against them?  No doubt this comes in handy.  Their very high expense ratios (.45%-.75% IIRC) are just too much for me, though.

Vanguard's treasury MM allows check writing.

It will open back up some day.

They should really make those checks look extra cool or something. Like, to show...there's no way this check ain't clearing.

Gumby wrote:

moda0306 wrote: I guess I assumed treasury MM accounts were actually administered by the treasury and weren't an investment house involvement.

No.. LW's got it right. The brokerage houses take the expense ratio as payment for working to keep the NAV at $1.

MediumTex wrote:

Lone Wolf wrote: I wonder whether these Treasury MM funds allow you to write checks against them?  No doubt this comes in handy.  Their very high expense ratios (.45%-.75% IIRC) are just too much for me, though.

Vanguard's treasury MM allows check writing.

It will open back up some day.

They should really make those checks look extra cool or something. Like, to show there's no way this check ain't clearing.

That's funny, because on the last check I wrote from this account I noticed that the check is cleared through Wachovia Bank (which is now deceased--it's an old checkbook) and I worried whether the check would clear.

I forgot, you're right. Vanguard uses a third-party for ACH transactions and wire transfers. Oh well.

Lone Wolf wrote: I wonder whether these Treasury MM funds allow you to write checks against them?  No doubt this comes in handy.  Their very high expense ratios (.45%-.75% IIRC) are just too much for me, though.

American Century (CPFXX) lets you write checks.  They have to be for over $100 though. 

Got that peaceful, easy feeling today when I checked the PP scoreboard.   I gave a brief thought to the assets in isolation crowd and chuckled.  It is amazing how much my thought process has changed since I adopted the PP. CNBC is great entertainment - news bunnies and bald salesmen hyping the markets better than Mean Gene Okerlund...

Very thankful to have some equal parts gold, cash, stocks, and long term treasuries to deal with whatever economic season appears.  I am worried about the economy, but not my permanent portfolio.  

Still need to tinker and guess, so I am raising cash in my variable portfolio...    

Its interesting how we all have that need to tinker isn't it brickhouse?

Its almost like we are cheating with the PP and miss the feeling of investing being "hard."

The PP really does feel like cheating.  One of my main hurdles to investing in the PP was snobbery.  Harry Browne's writing was straight and to the point.  It just seemed too simple.  When I read Dr. William Berstein's article, "Wild About Harry".  I caught that same snobbery.  He gave the portfolio grudging respect because the numbers absolutely demand respect.  Yet, he couldn't help but make snide remarks and take a shot at PP investors as bandwagon jumpers.  As I have watched the PP work over the years, it has been an education. It is like the sunglasses in They Live - exposing all of the nonsense of the stock bug crowd.

I love brick-house's posts.

Solid.

I use fxf etf swiss franks for my cash portion since I think the frank is more attractive then the dollar and so far its been a really good performer - what do you guys think about that switch

mandynshane wrote: I use fxf etf swiss franks for my cash portion since I think the frank is more attractive then the dollar and so far its been a really good performer - what do you guys think about that switch

Be careful.

Nothing goes up forever, and the Swiss franc trade is starting to look VERY tired to me.

At some point there will be intense domestic pressure in Switzerland to devalue to get more in line with the rest of its trading partners.

The move you are describing would have been great in late 2008.  In mid-2011, I would just stick with the basic HB PP approach.

Gold will provide you all the dollar devaluation hedge you need.

what do you think of plw etf vs tlt etf