Gyroscopic Investing

Man, I don't know. I keep running into business people and businesses that are desperate for workers. And big wage increases. I'll spare you the anecdotes, but they are everywhere.

My prediction, inflation soon and bigger than you expect. So will that be stagflation? Seems like a plausible scenario. But for how long, that's a bigger question. I also buy into the idea that this is still a deflationary world.

I Shrugged wrote: ↑Thu Jul 08, 2021 6:12 pm Man, I don't know. I keep running into business people and businesses that are desperate for workers. And big wage increases. I'll spare you the anecdotes, but they are everywhere.

My prediction, inflation soon and bigger than you expect. So will that be stagflation? Seems like a plausible scenario. But for how long, that's a bigger question. I also buy into the idea that this is still a deflationary world.

That's something else that doesn't seem to add up to me. Firstly, because aren't we supposed to be in the middle of an AI revolution that is reducing demand for workers? Second, unless workers have figured out a way to collectively organize to demand higher wages, I'm not sure how many people are going to be able to hold out very long once enhanced unemployment ends...at which time they will be back to competing with fellow workers in a global marketplace.

I Shrugged wrote: ↑Thu Jul 08, 2021 6:12 pm Man, I don't know. I keep running into business people and businesses that are desperate for workers. And big wage increases. I'll spare you the anecdotes, but they are everywhere.

My prediction, inflation soon and bigger than you expect. So will that be stagflation? Seems like a plausible scenario. But for how long, that's a bigger question. I also buy into the idea that this is still a deflationary world.

This is my thinking as well.

vincent_c wrote: ↑Fri Jul 09, 2021 10:16 am Perhaps what really matters is only what the markets think has happened or will happen so given that it's a possibility that the markets behave somewhat disconnected with our personal experience.

I think there's an assumption in the above statement that there is a free market, with rational investors reacting to stimulus, rather than captured markets which are being manipulated by large actors. For example, if the fed/other central banks can print money and exert more influence than the independent actors, then I don't believe one can try to read any of this/draw any conclusions, as it's not what the markets think, but more about what these large, motivated actors are trying to accomplish.

It's unclear to me right now if there are honest market signals out there, or a distorted set of signals that can't be relied upon in the same way one used to be able to.

Speaking of Falling Yields, I thought this snapshot of my IRA this morning was interesting. This is why I prefer holding my own bonds to buying shares. Fortunately, the amount I had in TLT was pretty small so I only lost $23.

Also, do you think I should sell that first batch of bonds when it goes < 20 years to maturity in November?

pp4me wrote: ↑Fri Jul 16, 2021 11:54 am Speaking of Falling Yields, I thought this snapshot of my IRA this morning was interesting. This is why I prefer holding my own bonds to buying shares. Fortunately, the amount I had in TLT was pretty small so I only lost $23.

Also, do you think I should sell that first batch of bonds when it goes < 20 years to maturity in November?

I suspect the apparent discrepancy here is that your IRA brokerage window was showing the current TLT price but delayed bond prices. The displayed bond prices were probably from market close yesterday (TLT's price rose by over 1% yesterday).

It's annoying that the brokerage windows often display delayed prices from their bond desk, but it just seems to be how they do things. I noticed a similar discrepancy in one of my brokerage windows several years ago.

If you account for the delay in the displayed prices from the bond desk, I think you'll find that your directly held LTTs move roughly in line with TLT as they should.

Tortoise wrote: ↑Fri Jul 16, 2021 12:46 pm I suspect the apparent discrepancy here is that your IRA brokerage window was showing the current TLT price but delayed bond prices. The displayed bond prices were probably from market close yesterday (TLT's price rose by over 1% yesterday).

This was exactly my experience when I held individual bonds. Both the vanguard prices and the WSJ published prices were a snapshot of the previous day's prices. Either closing or around 12:30pm (not sure).

Mark Leavy wrote: ↑Fri Jul 16, 2021 12:52 pm

Tortoise wrote: ↑Fri Jul 16, 2021 12:46 pm I suspect the apparent discrepancy here is that your IRA brokerage window was showing the current TLT price but delayed bond prices. The displayed bond prices were probably from market close yesterday (TLT's price rose by over 1% yesterday).

This was exactly my experience when I held individual bonds. Both the vanguard prices and the WSJ published prices were a snapshot of the previous day's prices. Either closing or around 12:30pm (not sure).

I suspected something like that too but the TLT is also way down overall compared to the individual bonds - like +10% compared to +21, +32, and +16 respectively.

And I don't even know how much the coupon payments factor into those rates of return.

But more generally speaking I have no regrets about holding any of those long bonds.

The weighted average maturity of TLT is currently about 26 years, so its price should be moving roughly in line with LTTs with 26-year maturity, right?

If so, and if that's not happening, then it seems like we have a bit of a Scooby Doo mystery on our hands.

Tortoise wrote: ↑Fri Jul 16, 2021 2:14 pm The weighted average maturity of TLT is currently about 26 years, so its price should be moving roughly in line with LTTs with 26-year maturity, right?

If so, and if that's not happening, then it seems like we have a bit of a Scooby Doo mystery on our hands.

Even if there is a good explanation for the mystery I like seeing those batches of bonds outdoing TLT from time to time. Also like seeing the coupon payments, and not paying the TLT fee. Kind of like physical gold vs an ETF makes you feel.

Agreed. Ever since I learned how easy it is to buy individual Treasuries, I’ve been doing that in most of my accounts. Similar performance as TLT, but lower counterparty risk and no expense ratio. Basically a free lunch.