TBills as "the best horse at the glue factory?"

Discussion of the Bond portion of the Permanent Portfolio

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sophie
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Re: TBills as "the best horse at the glue factory?"

Post by sophie » Sun Oct 02, 2022 4:39 pm

I did what dualstow did: 3 month autorolled T bills in my Fidelity investment account, in 3 aliquots roughly 1 month apart. Figuring I'll add to it as new cash comes in.

Also, I'm psychologically unable to review my accounts quarterly as I used to...the drop in value is too painful to look at. I'll screw up my courage because it's probably getting near time to rebalance, but for right now I'm very happy to let new savings pile up in cash. Another reason: my mother's care is starting to get expensive, and I'm foreseeing a time when I'll have to "loan" her large amounts of cash (hooray for IRS intrafamily loans). So I need to keep a good amount of money in liquid form.
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Re: TBills as "the best horse at the glue factory?"

Post by dualstow » Sun Oct 02, 2022 5:54 pm

Good luck to you, Sophie. It’s always great to hear from you!
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Re: TBills as "the best horse at the glue factory?"

Post by Smith1776 » Sun Oct 02, 2022 9:00 pm

sophie wrote:
Sun Oct 02, 2022 4:39 pm
I did what dualstow did: 3 month autorolled T bills in my Fidelity investment account, in 3 aliquots roughly 1 month apart. Figuring I'll add to it as new cash comes in.

Also, I'm psychologically unable to review my accounts quarterly as I used to...the drop in value is too painful to look at. I'll screw up my courage because it's probably getting near time to rebalance, but for right now I'm very happy to let new savings pile up in cash. Another reason: my mother's care is starting to get expensive, and I'm foreseeing a time when I'll have to "loan" her large amounts of cash (hooray for IRS intrafamily loans). So I need to keep a good amount of money in liquid form.
The behavioural and psychological side of one's investments is always an interesting thing to hear about. Wishing you and your mother well.
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Re: TBills as "the best horse at the glue factory?"

Post by jhogue » Mon Oct 03, 2022 10:15 am

Sorry to hear about your mother's condition, sophie.

Adding to my Cash pile rather than the other 3 volatile assets during times like the present dampens volatility and "feels" like an extra bit of cushion against the unexpected or unanticipated.
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A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: TBills as "the best horse at the glue factory?"

Post by foglifter » Mon Oct 03, 2022 7:38 pm

sophie wrote:
Sun Oct 02, 2022 4:39 pm
I did what dualstow did: 3 month autorolled T bills in my Fidelity investment account, in 3 aliquots roughly 1 month apart. Figuring I'll add to it as new cash comes in.
Sophie, it's good to hear from you! I hope you don't mind a question: do you buy T bills on the secondary market or at the auctions? Does it matter where to buy?
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Re: TBills as "the best horse at the glue factory?"

Post by Tyler » Mon Oct 03, 2022 10:13 pm

Kevin K. wrote:
Fri Sep 30, 2022 3:15 pm
For anyone who wants to go further down the rabbit hole with TIPS I posted Tyler's blog post on Bogleheads and there's a good bit of discussion there (with Tyler participating). I especially recommend the posts from vineviz, who may be the single most savvy bond expert (among many) on that forum:

https://www.bogleheads.org/forum/viewtopic.php?t=386923

This exchange between Tyler and vineviz specifically addresses the misconception that holding individual TIPS to maturity somehow changes the risks:

"Tyler9000 wrote:

However, as can be seen with the YTD return of a fund like TIP (currently -13% before inflation) "removing all risk" only applies to TIPS held individually all the way to maturity rather than through a liquid index fund that is subject to interest rate risk. One of my main goals with the article is to illustrate the difference."

vineviz: "We haven't touched on this, but this "difference" is also not actually a difference. A TIPS has the same amount of interest rate risk for an investor whether held directly or through a fund. It's not the method of holding that matters, but rather the degree of mismatch between the investor's investment horizon and the bond/fund's duration.

It's simply not true that a TIPS fund like has interest rate risk but an individual TIPS does not."


Anyway for me the take-away is that exactly as Dr. Bernstein says TIPS are best bought as individual bonds held to maturity to meet specific known expenses. But contrary to what Tyler and even Dr. Bernstein suggest TIPS funds aren't exactly a disaster - as long as you're treating them as the Treasury bonds they are, subject to the same ups and downs in their current value as any other Treasury, albeit with more short-term volatility.
It's funny -- I actually added some of the terminology in the article about the safety of TIPS held to maturity because I expected strong pushback from Bogleheads when I talked about the risk of TIPS funds. In fact, I was specifically thinking of the excellent Willthrill81* thread you brought to my attention where he leans heavily on that very assumption. Little did I know that Vineviz would single out that distinction for critique! It just goes to show that writing for a large crowd of smart people is tough sometimes. :P

(*) BTW, I was sad to learn that Willthrill81 no longer participates at Bogleheads due to its heavyhanded moderation policy. He was one of my favorites.
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Re: TBills as "the best horse at the glue factory?"

Post by dualstow » Tue Oct 04, 2022 8:46 am

Tyler wrote:
Mon Oct 03, 2022 10:13 pm

I was specifically thinking of the excellent Willthrill81* thread

(*) BTW, I was sad to learn that Willthrill81 no longer participates at Bogleheads due to its heavyhanded moderation policy. He was one of my favorites.
WillThrill was one of those stars that burned a little too brightly and thus burned out too soon. Didn’t even know he stopped until seeing your post just now. I always appreciated his comments on gold.
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Re: TBills as "the best horse at the glue factory?"

Post by Kbg » Tue Oct 04, 2022 10:38 am

Cortopassi wrote:
Sat Oct 01, 2022 3:23 pm
In a tax deferred IRA account, is there any reason I would not buy a 3 month CD vs. a 3 month Treasury? See the clip of rates. The higher rate on the Treasury is because maturity date is closer to end of Jan 2023, so closer to 4 months vs. 3. If I look at Treasury maturity dates in the range of the CD date, they are 0.1 to 0.2% lower than 3.3%

Just wondering. No fees for either, and the CDs are FDIC insured.

Image
Assuming holding to maturity and equivalent trading costs, buy the highest YTM period. YTM is an equalizing calculation if done properly.

In non-tax deferred accounts, treasuries would be a no brainer due to no state taxes due on Treasuries.
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Re: TBills as "the best horse at the glue factory?"

Post by Kevin K. » Tue Oct 04, 2022 11:39 am

Tyler wrote:
Mon Oct 03, 2022 10:13 pm
Kevin K. wrote:
Fri Sep 30, 2022 3:15 pm
For anyone who wants to go further down the rabbit hole with TIPS I posted Tyler's blog post on Bogleheads and there's a good bit of discussion there (with Tyler participating). I especially recommend the posts from vineviz, who may be the single most savvy bond expert (among many) on that forum:

https://www.bogleheads.org/forum/viewtopic.php?t=386923

This exchange between Tyler and vineviz specifically addresses the misconception that holding individual TIPS to maturity somehow changes the risks:

"Tyler9000 wrote:

However, as can be seen with the YTD return of a fund like TIP (currently -13% before inflation) "removing all risk" only applies to TIPS held individually all the way to maturity rather than through a liquid index fund that is subject to interest rate risk. One of my main goals with the article is to illustrate the difference."

vineviz: "We haven't touched on this, but this "difference" is also not actually a difference. A TIPS has the same amount of interest rate risk for an investor whether held directly or through a fund. It's not the method of holding that matters, but rather the degree of mismatch between the investor's investment horizon and the bond/fund's duration.

It's simply not true that a TIPS fund like has interest rate risk but an individual TIPS does not."


Anyway for me the take-away is that exactly as Dr. Bernstein says TIPS are best bought as individual bonds held to maturity to meet specific known expenses. But contrary to what Tyler and even Dr. Bernstein suggest TIPS funds aren't exactly a disaster - as long as you're treating them as the Treasury bonds they are, subject to the same ups and downs in their current value as any other Treasury, albeit with more short-term volatility.
It's funny -- I actually added some of the terminology in the article about the safety of TIPS held to maturity because I expected strong pushback from Bogleheads when I talked about the risk of TIPS funds. In fact, I was specifically thinking of the excellent Willthrill81* thread you brought to my attention where he leans heavily on that very assumption. Little did I know that Vineviz would single out that distinction for critique! It just goes to show that writing for a large crowd of smart people is tough sometimes. :P

(*) BTW, I was sad to learn that Willthrill81 no longer participates at Bogleheads due to its heavyhanded moderation policy. He was one of my favorites.
Well I certainly appreciate you taking the time to politely engage with that often-brilliant but even-more-often-curmudgeonly crowd @ Bogleheads Tyler. Let me know if you ever don't want me to post links to Portfolio Charts articles over there; I hope driving more traffic to your site and turning some of the hopefully more open-minded users of Bogleheads onto it is a good thing, but maybe not.

I, too, was sad to learn that willthrill81 had stopped posting over there. The moderation is ridiculously heavy-handed - which you'd think they'd start to realize when folks like him who are certainly among the best and brightest contributors head for the exits.

Bottom line for me is the world would be a whole lot better off if Portfolio Charts were as well-known as Bogleheads.
Last edited by Kevin K. on Tue Oct 04, 2022 2:26 pm, edited 1 time in total.
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Re: TBills as "the best horse at the glue factory?"

Post by Tyler » Tue Oct 04, 2022 11:49 am

Kevin K. wrote:
Tue Oct 04, 2022 11:39 am
Well I certainly appreciate you taking the time to politely engage with that often-brilliant but even-more-often-curmudgeonly crowd @ Bogleheads Tyler. Let me know if you ever don't want me to post links to Portfolio Charts articles over there; I fear driving more traffic to your site and turning some of the hopefully more open-minded users of Bogleheads onto it is a good thing, but maybe not.
Nah man -- keep doing what you're doing! I love it when people talk about PC on Bogleheads. And even when the brilliant-but-curmudgeonly crowd occasionally gives me a little heartburn, it keeps me on my toes. ;)
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Re: TBills as "the best horse at the glue factory?"

Post by vnatale » Tue Oct 04, 2022 12:00 pm

dualstow wrote:
Tue Oct 04, 2022 8:46 am

Tyler wrote:
Mon Oct 03, 2022 10:13 pm


I was specifically thinking of the excellent Willthrill81* thread

(*) BTW, I was sad to learn that Willthrill81 no longer participates at Bogleheads due to its heavyhanded moderation policy. He was one of my favorites.

WillThrill was one of those stars that burned a little too brightly and thus burned out too soon. Didn’t even know he stopped until seeing your post just now. I always appreciated his comments on gold.


Short while ago was reading about TIPS in another topic here and was led to Bogleheads where I saw Willthrill81.

An EXTREME prolific poster for a five year period starting in 2017 averaged 15 (!!) posts per day during that entire time.

I was expecting to see his last post announcing what you stated above but that did not seem to be the case? His last post was in early August, but he was active as of yesterday.

Active here and there does not require you to actually post something but to have at least logged in?
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Re: TBills as "the best horse at the glue factory?"

Post by vnatale » Tue Oct 04, 2022 12:53 pm

dualstow wrote:
Tue Sep 27, 2022 1:30 pm



I am unhappy about Vanguard’s recent site changes,


It is now quite a production to get at what mutual funds they offer ... which seems to be something that should always be upfront and prominent?

Seems like their current emphasis is trying to reel you in for some fee product?
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Re: TBills as "the best horse at the glue factory?"

Post by vnatale » Tue Oct 04, 2022 1:05 pm

Kevin K. wrote:
Fri Sep 30, 2022 11:23 am


In the case of the PP I think it's arguably worse still in that you've got 25% in a TSM fund that is not only doing poorly but whose returns and ability to recover in the future are entirely tied to the fate of a handful of mega-cap tech stocks; gold getting killed in dollar terms (only, mind you - it's actually doing okay for those who own it in any other currency!) due to the surge in the USD; cash (if in SHY or the like as is typical, rather than a pure Treasury MM fund) also slightly in the red due to interest rate increases, and worst of all a full 25% in 30 year Treasuries whose losses exceed those of the equities. In short not only significant losses YTD but nowhere near enough in diversified equities to recover in a turnaround and 25% sunk into bonds whose risk:return made them a very bad idea starting years ago that has now turned toxic.


Okay those were all the advantage for participating in The Permanent Portfolio.

Are you also going to go through all the disadvantages?
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: TBills as "the best horse at the glue factory?"

Post by vnatale » Tue Oct 04, 2022 1:22 pm

Maddy wrote:
Sat Oct 01, 2022 8:54 am

Kevin, I always get a lot out of your posts. Thank you.


Today I've been reading a lot of the posts in recent topics regarding T-Bills.

Therefore have encountered a lot of Kevin's posts.

I second your sentiment.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: TBills as "the best horse at the glue factory?"

Post by vnatale » Tue Oct 04, 2022 1:24 pm

jhogue wrote:
Sat Oct 01, 2022 1:49 pm

Vinny,
You can also buy paper copies of the Wall Street Journal at your local news outlet. As far as I know, the People's Republic of Massachusetts has not cancelled it yet.


For many, many reasons which I will not enumerate I prefer electronic versions over paper versions ...
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Re: TBills as "the best horse at the glue factory?"

Post by vnatale » Tue Oct 04, 2022 3:05 pm

https://tipswatch.com/2022/10/04/treasu ... e-sort-of/

TreasuryDirect launches its revamped website (sort of)
Posted on October 4, 2022 by Tipswatch
The outer shell is new, information is easier to find, more clearly presented. And then … same old, same old.

By David Enna, Tipswatch.com


If you’ve visited everyone’s favorite financial website — TreasuryDirect.gov — in the past few days, you might have noticed an important message on the homepage: A redesign is coming! And today … it launched.

The TreasuryDirect site is almost universally ridiculed, especially by new investors who have been piling in recently to load up on U.S. Series I Savings Bonds. I’ve been using this site for about 20 years and I’m comfortable with its quirks. But I still tell people, “It will remind you of MySpace.”

The biggest complaints I hear from readers concern difficulties in account creation and logging in, and unfortunately, the new design does nothing to solve those issues (at this point). Is more coming? I can’t say because TreasuryDirect has not formally announced the redesign. Its news section has no items posted in October and no mention of the redesign.

Let’s take a walk through the new look … and the old look hidden inside:
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: TBills as "the best horse at the glue factory?"

Post by barrett » Tue Oct 04, 2022 3:29 pm

Seems that Bogleheads' Willthrill81 has a lot of fans on this forum! I would sometimes scan through long threads just to read his posts. Damn, I am sorry to hear he's no longer welcome there as his contributions were super insightful.
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Re: TBills as "the best horse at the glue factory?"

Post by sophie » Tue Oct 04, 2022 6:20 pm

foglifter wrote:
Mon Oct 03, 2022 7:38 pm
sophie wrote:
Sun Oct 02, 2022 4:39 pm
I did what dualstow did: 3 month autorolled T bills in my Fidelity investment account, in 3 aliquots roughly 1 month apart. Figuring I'll add to it as new cash comes in.
Sophie, it's good to hear from you! I hope you don't mind a question: do you buy T bills on the secondary market or at the auctions? Does it matter where to buy?
Good to see you posting as well!

I got T bills at auction at Fidelity, and set autoroll when I put in the order. Very easy to do! Stopping the autoroll is harder, you have a very brief window, like a few hours, where you have to log on and modify or cancel the autoroll order. Not too happy about that, but the interest is nice to get.
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Re: TBills as "the best horse at the glue factory?"

Post by Kevin K. » Tue Oct 04, 2022 6:53 pm

sophie wrote:
Tue Oct 04, 2022 6:20 pm
foglifter wrote:
Mon Oct 03, 2022 7:38 pm
sophie wrote:
Sun Oct 02, 2022 4:39 pm
I did what dualstow did: 3 month autorolled T bills in my Fidelity investment account, in 3 aliquots roughly 1 month apart. Figuring I'll add to it as new cash comes in.
Sophie, it's good to hear from you! I hope you don't mind a question: do you buy T bills on the secondary market or at the auctions? Does it matter where to buy?
Good to see you posting as well!

I got T bills at auction at Fidelity, and set autoroll when I put in the order. Very easy to do! Stopping the autoroll is harder, you have a very brief window, like a few hours, where you have to log on and modify or cancel the autoroll order. Not too happy about that, but the interest is nice to get.
Let me add my voice to the chorus of folks welcoming you back sophie! You've always been one of the most thoughtful and insightful contributors here and it's great to see you back here. I'm also sorry you're having to deal with challenges with your mom; it's that time of life for a lot of us here. And add me to the list of people who need to avoid looking at my investment accounts more than once a quarter if at all possible!

I'm buying 13 and 26 week Tbills at auction through Schwab with autoroll and finding it easy so far. Those TBills and a slug of iBonds are the entire "cash" part of my Golden Butterfly bond barbell - and VTIP is the other half. I stick to the true faith with the other 60% of the portfolio because I still think the logic of SCV with TSM for equities and gold for all of its unique qualities makes since. I bailed on LTT's long ago and had mostly ITT's for the 40% bond and cash allocation but have come to the same conclusions about bonds as Jonathan Clements has: they're for dry powder (cash for living expenses, cash for replenishing the other assets during rebalancing), not yield. Not that I don't enjoy seeing ~4% interest on my cash for the first time in years (even if it's more like -4.3% real).

With all of the carnage in the stock market I don't think many investors are really looking at just how likely persistent high inflation and with it a sustained bear bond market is going forward. As with today's inflation levels it's not something most folks investing today have ever seen, but as John LIn (who writes for Clements' "Humble Dollar" site) points out such conditions can be far more long-lasting and devastating than a (typically short-lived) stock market crash:

https://humbledollar.com/2022/04/ditching-bonds/

Clements himself went to half VTIP, half STT's years ago and has never looked back. I wish I had his nerves of steel on the equity side (he's at ~70%, pretty much all in Vanguard Total World and has been happily adding to his equities during every market crash, including the one in March 2020 and the current one) but hey the PP and GB are more than volatile enough for this scaredy-cat.
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