TBonds saved me in 2008. Now, not sure what to do now.

[rllewis]

I was really glad I had long term TBonds in 2008. They saved my portfolio. Now it just seems like they'll never come back and the roof will finally cave in. Do I rebalance and buy some more? Or get the hell out?

[snedgar]

Hey RL,

I think you are expressing what a lot of us think sometimes. Since you asked, here's my advice:

Stick with your investment plan.

If you're becoming disenamored with it, then research to find another one and convince yourself that it's really better than your current plan. Once you are convinced, float that new plan past several trusted people to see if they can poke holes in it. If, after all this, you are truly convinced that your new plan is better, then go all-in and switch over to that new plan.

But don't just wing it, buying this or selling that based on how you feel.

[rllewis]

Thanks snedgar. Very helpful. Harry Browne's rule #1: almost nothing turns out as expected. I guess that would apply to thinking TBonds are a lost cause at this point. Stay the course.

[stuper1]

Another thing is make sure to look at the overall performance of your total portfolio. Don't just look at one piece in isolation, but look at the whole thing. Then, compare it to some other portfolios like say the standard 60/40 stock/bond portfolio. You might find your portfolio hasn't done too badly compared to other possible portfolios you could have chosen.

Be careful though. You might find a portfolio that did a lot better than yours. And then you might switch all your investments to this new portfolio. And just about the time you do that, the new portfolio might start doing worse than the old one. So don't make any big changes until you are sure you have good fundamental reasons and not just based on the last X months of performance.

[barrett]

I was really glad I had long term TBonds in 2008. They saved my portfolio. Now it just seems like they'll never come back and the roof will finally cave in. Do I rebalance and buy some more? Or get the hell out?

Long bonds to me have always been sort of an Achilles Heel of the PP just because their periods of outperformance (at least over the last 15 years) have tended to be short lived. That, of course, makes sense just because the yield on long-term debt can only go down so far before investors start believing that the risk/reward profile is too skewed toward risk. So, you have these short-lived periods of outperformance like a few weeks at the end of 2008 or during the initial weeks of the 2020 covid-induced panic.

It seems to me that when the yield on 30-year debt is above, say 4-5%, holding them makes a lot more sense whereas keeping them after a sharp rally (late 2008, early 2020) makes much less sense. I, of course, have the benefit of hindsight but long bonds tend to give up their gains very quickly. The chart below is not very granular but illustrates what I am talking about:

https://www.cnbc.com/quotes/US30Y

Set that to "All" to get about 35 years of data.

Did long bonds save you in 2008 because you in fact rebalanced in that short window of opportunity? Or did you sell part of your long bond position in 2020 when the yield briefly dropped below 1%? If you have a working crystal ball or very tight PP bands, I think they can work great. Otherwise they tend to give away what they taketh and, at times, quite quickly.

This all being said, if you have hung onto your LTTs this long, now would seem like it may be an inopportune time to sell them as the Fed is seemingly nearing the end of its tightening cycle and the yield current stands at 4.4%. Put another way, the current yield is well above what the Fed is targeting for inflation.

The big picture for me is that long bonds cannot quadruple or quintuple in value in the same way that stocks (and occasionally gold) can and have done over time frames of multiple years. I got rid of my long bonds several years ago when I was lucky to have a modest gain after holding them for four year or so.

Anyway, this is just one point of view. Maybe worth dumping but probably not at a time when they have already gotten beaten down pretty badly.

Hope whatever you decide to do works out well. I was unable to stomach holding three volatile assets. I seem to be OK with holding two.

[Hal]

While I don't follow the US market much, it seems both bonds and shares are rather elevated in price. As I couldn't find the 30y bond price, imagine you have 50% 10 year bonds, 25% each shares & gold. Thoughts?

[barrett]

While I don't follow the US market much, it seems both bonds and shares are rather elevated in price. As I couldn't find the 30y bond price, imagine you have 50% 10 year bonds, 25% each shares & gold. Thoughts?

30-year yields are elevated but not their price... which is probably what you meant to write. The last time long bonds were at this yield level was way back in 2011. That's why I think now might be a lousy time to sell. But I am just some guy on the Internet who doesn't know a lot.

[barrett]

I was really glad I had long term TBonds in 2008. They saved my portfolio. Now it just seems like they'll never come back and the roof will finally cave in. Do I rebalance and buy some more? Or get the hell out?

Long bonds to me have always been sort of an Achilles Heel of the PP just because their periods of outperformance (at least over the last 15 years) have tended to be short lived. That, of course, makes sense just because the yield on long-term debt can only go down so far before investors start believing that the risk/reward profile is too skewed toward risk. So, you have these short-lived periods of outperformance like a few weeks at the end of 2008 or during the initial weeks of the 2020 covid-induced panic.

It seems to me that when the yield on 30-year debt is above, say 4-5%, holding them makes a lot more sense whereas keeping them after a sharp rally (late 2008, early 2020) makes much less sense. I, of course, have the benefit of hindsight but long bonds tend to give up their gains very quickly. The chart below is not very granular but illustrates what I am talking about:

https://www.cnbc.com/quotes/US30Y

Set that to "All" to get about 35 years of data.

Did long bonds save you in 2008 because you in fact rebalanced in that short window of opportunity? Or did you sell part of your long bond position in 2020 when the yield briefly dropped below 1%? If you have a working crystal ball or very tight PP bands, I think they can work great. Otherwise they tend to give away what they taketh and, at times, quite quickly.

This all being said, if you have hung onto your LTTs this long, now would seem like it may be an inopportune time to sell them as the Fed is seemingly nearing the end of its tightening cycle and the yield currently stands at 4.4%. Put another way, the current yield is well above what the Fed is targeting for inflation.

The big picture for me is that long bonds cannot quadruple or quintuple in value in the same way that stocks (and occasionally gold) can and have done over time frames of multiple years. I got rid of my long bonds several years ago when I was lucky to have a modest gain after holding them for four year or so.

Anyway, this is just one point of view. Maybe worth dumping but probably not at a time when they have already gotten beaten down pretty badly.

Hope whatever you decide to do works out well. I was unable to stomach holding three volatile assets. I seem to be OK with holding two.

[barrett]

Double posted something. Sorry about that!

[Smith1776]

Double posted something. Sorry about that!

Your punishment is 10 lashings with a wet noodle.