The Bond Dream Room

Discussion of the Bond portion of the Permanent Portfolio

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ochotona
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Re: The Bond Dream Room

Post by ochotona » Wed Aug 28, 2019 8:06 am

I'm just not getting excited about putting new money into TLT right here...

https://i2.wp.com/northmantrader.com/wp ... .png?ssl=1

For years and years, after TLT has hit the top of that trend, 6, 12, or 18 months later, investors were regretting buying at the peak.
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Re: The Bond Dream Room

Post by sophie » Wed Aug 28, 2019 8:20 am

Eh, that's what I was saying to myself when the 30 year yield was 2.5%.

Speaking of which, anyone hit a rebalance band yet?
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Re: The Bond Dream Room

Post by Ugly_Bird » Wed Aug 28, 2019 8:31 am

sophie wrote:
Wed Aug 28, 2019 8:20 am
Speaking of which, anyone hit a rebalance band yet?
After this LTT and Au surge, mine is pretty well balanced now :-)
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Re: The Bond Dream Room

Post by Kbg » Wed Aug 28, 2019 8:38 am

In some other stuff I read, supposedly the gap between US interest rates and the rest of the world is projected to close and hence the movement in i-rates down.
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Re: The Bond Dream Room

Post by dualstow » Wed Aug 28, 2019 9:04 am

sophie wrote:
Wed Aug 28, 2019 8:20 am
Eh, that's what I was saying to myself when the 30 year yield was 2.5%.

Speaking of which, anyone hit a rebalance band yet?
I might have if i hadn’t stupidly sold my “worst” bonds in 2018. With bonds up so much but still underweight in my allocation due to the sale, I guess I have to leave it alone.

Certainly not complaining though. It’s nice to see all four assets well in the black. O0
Feels like the end of the everything rally.
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Re: The Bond Dream Room

Post by pmward » Wed Aug 28, 2019 11:37 am

ochotona wrote:
Wed Aug 28, 2019 8:06 am
I'm just not getting excited about putting new money into TLT right here...

https://i2.wp.com/northmantrader.com/wp ... .png?ssl=1

For years and years, after TLT has hit the top of that trend, 6, 12, or 18 months later, investors were regretting buying at the peak.
I would still put money into TLT in the PP for a long term hold at this point. Even if odds of large return in the short timeframe you listed is not particularly high, the odds of large return on the longer term is still intact. I think the problem right now is that these markets are currently impossible to read on the short timeframe you listed. It's really a coin flip for each asset as to whether or not it will go up, tread sideways, or go down. Nobody has any clue what is going to happen right now. So personally, in my GB if on a DCA day bonds were my lowest asset, I would still put fresh cash into them even at the top of the channel. Now, that obviously hasn't happened in some time as bonds have rallied like crazy so most of my fresh money has been going into cash and stocks (ugh those small caps in particular, if anything the small caps are the asset that I'm loathe to be holding at the moment as technically they just have not a single sign of life going on; I'm very tempted to start moving some of these over to REIT's but selling an asset low to buy an asset high is something I find hard to pull the trigger on).
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Re: The Bond Dream Room

Post by ochotona » Wed Aug 28, 2019 12:12 pm

pmward wrote:
Wed Aug 28, 2019 11:37 am
So personally, in my GB if on a DCA day bonds were my lowest asset, I would still put fresh cash into them even at the top of the channel. Now, that obviously hasn't happened in some time as bonds have rallied like crazy so most of my fresh money has been going into cash and stocks (ugh those small caps in particular, if anything the small caps are the asset that I'm loathe to be holding at the moment as technically they just have not a single sign of life going on; I'm very tempted to start moving some of these over to REIT's but selling an asset low to buy an asset high is something I find hard to pull the trigger on).

The weird thing is, and it's 100% in my head, once I have owned an asset "for a few months", I don't care what it does, but if it goes against me right after I buy it, I take it hard. In other words, there is a lag time until the Endowment Effect takes hold in my brain. Have you noticed the same?
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Re: The Bond Dream Room

Post by pmward » Wed Aug 28, 2019 12:23 pm

ochotona wrote:
Wed Aug 28, 2019 12:12 pm
pmward wrote:
Wed Aug 28, 2019 11:37 am
So personally, in my GB if on a DCA day bonds were my lowest asset, I would still put fresh cash into them even at the top of the channel. Now, that obviously hasn't happened in some time as bonds have rallied like crazy so most of my fresh money has been going into cash and stocks (ugh those small caps in particular, if anything the small caps are the asset that I'm loathe to be holding at the moment as technically they just have not a single sign of life going on; I'm very tempted to start moving some of these over to REIT's but selling an asset low to buy an asset high is something I find hard to pull the trigger on).

The weird thing is, and it's 100% in my head, once I have owned an asset "for a few months", I don't care what it does, but if it goes against me right after I buy it, I take it hard. In other words, there is a lag time until the Endowment Effect takes hold in my brain. Have you noticed the same?
When I was trading I used to big time. I was a swing trader, so my goal was usually one week to couple month hold. What used to kill me is when I would buy something and it would close the first day down from my purchase price. Since I've moved away from trading into the GB I do not find this particularly bothersome. I think it also helps that I'm DCA'ing every 2 weeks, so I've got money going in so often to so many assets that I just pay less attention. Small caps though have been frustrating me lately. Seeing them obviously in a downtrend with no hope of life anytime in the near future has really tested my patience. Matter of fact, F it, I'm just going to do it. I'm going to move half my small cap VP over to REIT's. I did some research and the DFA REIT available in my 401k has a 4.3% yield and has been holding up nicely during the recent volatility. In my IRA I can buy any REIT ETF I want. So I think I'm going to pull the trigger. I just have no real hope for small caps in the next couple years at least. So reducing that to 10% and adding 10% REIT's seems like a decent tactical move for the next little while, at least until this unpredictable volatility gets sorted out and small caps start a new uptrend.
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Re: The Bond Dream Room

Post by pmward » Wed Aug 28, 2019 12:28 pm

And it is done. Current target allocation 20% TSM, 20% long bonds, 20% cash (or equivalent), 10% Small cap blend (S&P 600 preference where possible), 10% REIT. I feel much better now. So you all can officially sell REIT's to buy small caps now, since this is of course likely going to blow up in my face, hahaha.
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Re: The Bond Dream Room

Post by sophie » Thu Aug 29, 2019 4:48 am

Just checked the portfolio, and I'm not even close to hitting a rebalance band. Darn the PP for being so stable! On the other hand stocks haven't really dropped by much.

pmward, look out for the constantly shifting target allocation game. It's market timing in disguise and will get you to the same place, which is about a 95% chance of underperforming a passive strategy in the long run.
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Re: The Bond Dream Room

Post by flyingpylon » Thu Aug 29, 2019 8:19 am

What I find irritating is when an asset class has a run that brings you to within a percentage point or two of a rebalancing band but you hesitate to avoid pulling the trigger too soon, and then it retreats. It happened to me with stocks and now I'm mentally preparing myself for it to happen again with bonds or gold.

Of course you only know about that if you're checking frequently enough to notice. ;)
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Re: The Bond Dream Room

Post by Kbg » Thu Aug 29, 2019 11:28 am

Perhaps we overthink this too much, most studies indicate rebalancing doesn’t make a huge difference one way or another and if you peel the skin back you quickly realize rebalancing strategy winners and losers are a function of path dependency.

So what is concrete and knowable (or can be knowable) with a little bit of effort?

Tax impact

Trading costs

The latter isn’t really that big a deal anymore unless you are doing it frequently.

Conclusion: If you are in a tax deferred account and you’ve considered trading costs, if it makes you feel better and more able to stick with your strategy, pull the trigger.
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Re: The Bond Dream Room

Post by dualstow » Thu Aug 29, 2019 11:45 am

Kbg wrote:
Thu Aug 29, 2019 11:28 am
Perhaps we overthink this too much
I overthink just enough O0
Feels like the end of the everything rally.
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Re: The Bond Dream Room

Post by ochotona » Sun Sep 01, 2019 8:55 pm

WOLF THINKS WE'RE ALL GETTING PLAYED BY THE BOND PLAYERS

https://youtu.be/irsgR3u256E

We've gotten played before... why not now? What if this recession talk is partly just bond traders talking their book and jawboning yield down? The hard data is slowing, but we're not in a recession.

And then this comes to mind again and again...

What if Trump just needs low rates so he can service his own business debt? Occam's Razor, people.. the man is greedy, self-serving son-of-a-binch. He frickin' was marketing Doral the other day in press conferences!
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Re: The Bond Dream Room

Post by Smith1776 » Sun Sep 01, 2019 9:41 pm

One thing that I really love about the PP is how it makes it so that I don't have to think about interest rates, yield curve inversion, credit risk, or anything of the sort.

A while ago I was talking to a few coworkers and they kept trying to game up strategies and discuss what the yield curve and interest rate environment meant for their investment approaches. Naturally, everyone had their own opinion. People wanted to dial down their duration. Then all of the sudden there was lamentation that the long bonds were actually outperforming. But was it now too late?

With the PP we can just sit back and relax. 8)

Yes, I'm guilty of tinkering with the stock allocation as per my latest post in the stock scream room, but I'm cool as a cucumber in most respects.
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Re: The Bond Dream Room

Post by Kriegsspiel » Mon Sep 02, 2019 5:57 am

ochotona wrote:
Sun Sep 01, 2019 8:55 pm
WOLF THINKS WE'RE ALL GETTING PLAYED BY THE BOND PLAYERS

https://youtu.be/irsgR3u256E
I like that guys voice. He does a great job aping El-Erian's speech impediment ;D
What if Trump just needs low rates so he can service his own business debt? Occam's Razor, people.. the man is greedy, self-serving son-of-a-binch. He frickin' was marketing Doral the other day in press conferences!
Wouldn't the simplest explanation be that Trump just wants the economy to be ok during his tenure? I would think the fact that he's a businessman would add weight to that explanation. So even if he is greedy and self-serving (which both seem true), his interests are aligned with America's, right? Or at the least, he's kicking the can down the road like everyone else excepting Volcker. Am I missing something?
[It is a] fact beyond question that soldiers' battles, where one side is entrenched and invisible and the other advancing in attack, are things of the past, except in a wooded country or where all preliminary movements are concealed. We had soldiers' battles here, but by fighting them the lesson has been taught which the world will learn.
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Re: The Bond Dream Room

Post by pmward » Mon Sep 02, 2019 9:39 am

ochotona wrote:
Sun Sep 01, 2019 8:55 pm
WOLF THINKS WE'RE ALL GETTING PLAYED BY THE BOND PLAYERS

https://youtu.be/irsgR3u256E

We've gotten played before... why not now? What if this recession talk is partly just bond traders talking their book and jawboning yield down? The hard data is slowing, but we're not in a recession.

The U.S. treasury bond market is simply too large and too liquid to be manipulated like that. I mean, even the Fed has a hard time controlling the bond market. No we are not in a recession, but defensives like bonds usually rally BEFORE the recession. Matter of fact, it's usually after the yield curve begins to steepen that the recession is officially declared. We have not had a steepening yet. So yes, it makes total sense that we are not declared to be in a recession yet. There are so many deflationary pressures globally, and global central banks that keep pushing rates lower and lower. The U.S. has no choice but to ease, because not easing is essentially tightening when the rest of the world keeps going more and more negative. This is what is really pushing our yields down, it's more of a global phenomenon than anything else. And as much as I do believe a recession is coming in the short to medium term, I also would not be surprised if it didn't come, and if this whole inversion was simply led by foreigners chasing yield. I do not think the bond rally is overdone just yet. I think we still have a lot of room for a true blowoff top to end the almost 40 year old bull market. 30 year bond sub 1% would not surprise me at all by the time this whole cycle is said and done. Matter of fact, I would be surprised if we didn't get below 1% by the end of the cycle.

Let us not also forget that the large amount of government debt that we have pretty much guarantees that the Fed needs to keep rates artificially low. So, even though bonds have come a long way, there is a very limited downside potential. For now, the Fed still has our backs, so bonds are still a safe trade and there is nothing to worry about aside from AT MOST maybe a short term correction. So long story short, I do not think that your fears are justified. The real risk to bonds is if/when inflation actually starts to pick up, because the Fed will be forced to keep rates low to allow servicing of the debt, and that will cause some chaos and destruction. But I do not see inflation in the near term, especially with the trade war, which even though it does increase prices, it is a tax, and taxes at the end of the day have a tightening effect on the economy.
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Re: The Bond Dream Room

Post by ochotona » Mon Sep 02, 2019 10:00 am

Kriegsspiel wrote:
Mon Sep 02, 2019 5:57 am
Wouldn't the simplest explanation be that Trump just wants the economy to be ok during his tenure? I would think the fact that he's a businessman would add weight to that explanation. So even if he is greedy and self-serving (which both seem true), his interests are aligned with America's, right? Or at the least, he's kicking the can down the road like everyone else excepting Volcker. Am I missing something?
Yes, a President's personal fortune should absolutely 100% be aligned with that of the Nation. I would go so far as to say his or her portfolio should be like Jack Bogle's was, 100% USA domestic. Nothing ex-US. Aligned with the USA, but no hint, fear, or even possibility that the portfolio should ever be seeking special situations created by the President himself while in office, especially which pit one group of investors against another.

The thing missing is that Trump refused to place his assets in a blind trust before he took office as Presidents before him have done, therefore he didn't create a firewall which prevents even the appearance of conflict of interest. As any corporate communications manager / crisis manager will tell you, the very appearance of wrong-doing can be as bad as the actual fact. The appearance can damage a brand or company even in the absence of any actual wrong-doing.

So once again, Trumpster harvests more bitter self-sown fruit, then basically blames others for the astringent taste. This idea is all over social media, and he is profiting off of his tweets through proxies. I am sure we'll hear more from the SEC after he leaves office. They've got to be quietly archiving trade data just before and after major tweets and tantrums and looking for patterns and network associations. That's what they do.

I want to know to whom he really owes money. Which NY mobsters? Which Russian mobsters? But he refused to disclose his portfolio and tax returns, as other Presidents have done. What has he been hiding? Really, for God's sake. I'll tell everyone here what I own, by % basis. In fact, I have. Why can't the President? He can't it would be incriminating.
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Re: The Bond Dream Room

Post by Kriegsspiel » Mon Sep 02, 2019 12:45 pm

ochotona wrote:
Mon Sep 02, 2019 10:00 am
The thing missing is that Trump refused to place his assets in a blind trust before he took office as Presidents before him have done, therefore he didn't create a firewall which prevents even the appearance of conflict of interest. As any corporate communications manager / crisis manager will tell you, the very appearance of wrong-doing can be as bad as the actual fact. The appearance can damage a brand or company even in the absence of any actual wrong-doing.

So once again, Trumpster harvests more bitter self-sown fruit, then basically blames others for the astringent taste. This idea is all over social media, and he is profiting off of his tweets through proxies. I am sure we'll hear more from the SEC after he leaves office. They've got to be quietly archiving trade data just before and after major tweets and tantrums and looking for patterns and network associations. That's what they do.
What are the best examples of Trump manipulating and profiting? Maybe you have some bookmarked?
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Re: The Bond Dream Room

Post by Kriegsspiel » Mon Sep 02, 2019 12:50 pm

And I do want to add that I'd be super surprised if Trump wasn't doing something shady. I think pretty much every President in recent history has done shady shit while in office and outside of it.
[It is a] fact beyond question that soldiers' battles, where one side is entrenched and invisible and the other advancing in attack, are things of the past, except in a wooded country or where all preliminary movements are concealed. We had soldiers' battles here, but by fighting them the lesson has been taught which the world will learn.
- James Barnes. 15 years before WW I.
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Re: The Bond Dream Room

Post by ochotona » Mon Sep 02, 2019 6:25 pm

Kriegsspiel wrote:
Mon Sep 02, 2019 12:50 pm
And I do want to add that I'd be super surprised if Trump wasn't doing something shady. I think pretty much every President in recent history has done shady shit while in office and outside of it.
Of course, I have no proof. No one does, because it's all hidden. But there is such a yuuuge opportunity for him (or any world leader) to profit off of market-moving statements and actions. That is why it is important for the American President to even be above the appearance of wrongdoing, to be so transparent that even suspicion by the reasonably skeptical opposition is impossible.

The assets have to be in a blind trust. Totally locked-up, passive, untradeable, 100% Total USA Stock Market buy and hold until out of office, live or die with the rest of us. Does anyone disagree with that?
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Re: The Bond Dream Room

Post by Ad Orientem » Mon Sep 02, 2019 6:29 pm

Kriegsspiel wrote:
Mon Sep 02, 2019 12:45 pm
ochotona wrote:
Mon Sep 02, 2019 10:00 am
The thing missing is that Trump refused to place his assets in a blind trust before he took office as Presidents before him have done, therefore he didn't create a firewall which prevents even the appearance of conflict of interest. As any corporate communications manager / crisis manager will tell you, the very appearance of wrong-doing can be as bad as the actual fact. The appearance can damage a brand or company even in the absence of any actual wrong-doing.

So once again, Trumpster harvests more bitter self-sown fruit, then basically blames others for the astringent taste. This idea is all over social media, and he is profiting off of his tweets through proxies. I am sure we'll hear more from the SEC after he leaves office. They've got to be quietly archiving trade data just before and after major tweets and tantrums and looking for patterns and network associations. That's what they do.
What are the best examples of Trump manipulating and profiting? Maybe you have some bookmarked?
Well he is constantly promoting his resorts and taking VIP visitors there, at huge expense to taxpayers (and profit to the Trump Org). When he first took office China suddenly approved scores of trademarks and other concessions related to Trump, his family and businesses. My guess is that they may be experiencing a bad case of buyers regret right now. Its common knowledge that those who patronize his businesses get preferred treatment or access in his administration. A quick Google turned up endless cases of apparent self dealing and/or apparent conflicts of interest. He is facing scores of lawsuits including some he has settled for undisclosed amounts of money. His charity the Trump Foundation was basically a tax dodge and scam where he routinely used money for personal indulgences. The state of NY shut it down. I don't think it is an exaggeration to say that this is the most corrupt president in US History.
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Re: The Bond Dream Room

Post by flyingpylon » Tue Sep 03, 2019 8:44 am

Ad Orientem wrote:
Mon Sep 02, 2019 6:29 pm
I don't think it is an exaggeration to say that this is the most corrupt president in US History.
Which criteria should be used to determine "the most corrupt president in US history" and which should be ignored?

Your post is filled with phrases like "common knowledge", "a quick Google", "apparent" and "basically"... do those seem like reasonable standards by which to determine the most corruption?

Does the mere existence of lawsuits or settled lawsuits indicate corruption?
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Re: The Bond Dream Room

Post by dualstow » Thu Sep 05, 2019 10:30 am

(Quote is from Gold Scream, not here)
ochotona wrote:
Thu Sep 05, 2019 9:40 am
Gold and long Treasuries will be under assault for a while...
The fed is lining up another small rate cut, but I guess other factors are weightier right now.
Feels like the end of the everything rally.
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Re: The Bond Dream Room

Post by ochotona » Thu Sep 05, 2019 3:03 pm

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