The Bond Dream Room

Discussion of the Bond portion of the Permanent Portfolio

Moderator: Global Moderator

User avatar
ochotona
Executive Member
Executive Member
Posts: 3214
Joined: Fri Jan 30, 2015 5:54 am

Re: The Bond Dream Room

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

User avatar
pugchief
Executive Member
Executive Member
Posts: 4331
Joined: Tue Jun 26, 2012 2:41 pm
Location: suburbs of Chicago, IL

Re: The Bond Dream Room

Post by pugchief » Thu Sep 05, 2019 7:05 pm

Why would you hold them for 20 years? If rates rise above 4%, would you still hold, just to get the 3.53%? If you need the cash, you're screwed at 0.1% And if rates don't rise, but you forget to cash them in in exactly 20 years, you net return drops by the day. Only the author and JHogue* think these are worth buying. ;D



*Hogue, just messing with you.
User avatar
ochotona
Executive Member
Executive Member
Posts: 3214
Joined: Fri Jan 30, 2015 5:54 am

Re: The Bond Dream Room

Post by ochotona » Thu Sep 05, 2019 10:14 pm

Japanification, that's why.
User avatar
jhogue
Executive Member
Executive Member
Posts: 569
Joined: Wed Jun 28, 2017 10:47 am

Re: The Bond Dream Room

Post by jhogue » Fri Sep 06, 2019 9:40 am

The key question for potential EE bond investors this:

Do you have a 20 year plan for your money? If you don’t, then you should never buy EE bonds. If you do have a 20 year plan (or longer), then EE bonds might have a useful role in your portfolio.

Pugchief’s worry that rates may rise above 4.00% reminds me of the warnings I got from “professional” financial advisors not to buy 30 year T bonds when I shifted to the HBPP back in 2013: The conventional wisdom then—and now too—was that interest rates "have no place to go but up!"
“Groucho Marx wrote:
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!"
User avatar
ochotona
Executive Member
Executive Member
Posts: 3214
Joined: Fri Jan 30, 2015 5:54 am

Re: The Bond Dream Room

Post by ochotona » Fri Sep 06, 2019 10:47 am

Given my age, I can only really buy $30,000 of these things, I own none now. 2019, 2020, 2021 then I turn 60 in 2021. I don't mind betting on really low inflation risk with less than 2% of my portfolio. If I'm wrong, no great harm done. If the 30 year goes stays at 2%, I'm happy. It'll just be more deep cash.
User avatar
pugchief
Executive Member
Executive Member
Posts: 4331
Joined: Tue Jun 26, 2012 2:41 pm
Location: suburbs of Chicago, IL

Re: The Bond Dream Room

Post by pugchief » Fri Sep 06, 2019 12:47 pm

jhogue wrote:
Fri Sep 06, 2019 9:40 am
The key question for potential EE bond investors this:

Do you have a 20 year plan for your money? If you don’t, then you should never buy EE bonds. If you do have a 20 year plan (or longer), then EE bonds might have a useful role in your portfolio.

Pugchief’s worry that rates may rise above 4.00% reminds me of the warnings I got from “professional” financial advisors not to buy 30 year T bonds when I shifted to the HBPP back in 2013: The conventional wisdom then—and now too—was that interest rates "have no place to go but up!"
I never said I was worried that rates would rise. I have no idea if they will go up or down. But 4% is not out of the realm of serious potential. So is 1%. Either way, I think EEs are a pointless waste. But to each his own.
User avatar
jhogue
Executive Member
Executive Member
Posts: 569
Joined: Wed Jun 28, 2017 10:47 am

Re: The Bond Dream Room

Post by jhogue » Fri Sep 06, 2019 4:23 pm

I certainly do not consider EE bonds to be “a pointless waste.” A couple of specific, real world examples:

1. The EE bonds we used to pay for our daughter’s college back in 2007-2011 paid 6% p.a. and were both federal tax free and tax deferred. The accumulated interest was also exempt from all state and local taxes. Considering how badly the stock market crashed in 2008-2009, I was pretty happy with our EE bonds’ return ON principal as well as their return OF principal.

2. The current crop of EE bonds, which will return 3.53% if held for 20 years, were first offered in 2003. They achieve their doubling effect less than four years from now in 2023. I see no indication that those who invested in EE bonds then are unhappy with their performance now. Indeed, with 10 years currently at 1.55%; 20 years at 1.83%; and 30 year T bonds hovering around 2.00%, if anything, EE bond investors are a pretty smug bunch right now.

EE bonds are just another tool in the financial toolbox. You just have to make sure you are using the right tool for the right job.
Last edited by jhogue on Mon Oct 14, 2019 9:03 am, edited 1 time in total.
“Groucho Marx wrote:
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!"
User avatar
dualstow
Executive Member
Executive Member
Posts: 11634
Joined: Wed Oct 27, 2010 10:18 am
Contact:

Re: The Bond Dream Room

Post by dualstow » Fri Sep 06, 2019 5:27 pm

I’m glad for this thread. i have a bunch of these that I’m supposed to redeem and i keep putting it off and forgetting about them. I-bonds, too.
Feels like the end of the everything rally.
In Britain they have made burglary a safe occupation. It's like OSHA for burglars.
- Thomas Sowell on gun control
User avatar
jhogue
Executive Member
Executive Member
Posts: 569
Joined: Wed Jun 28, 2017 10:47 am

Re: The Bond Dream Room

Post by jhogue » Fri Sep 06, 2019 7:39 pm

You are welcome.

And fortunately we have pugchief around to keep us on our toes by keeping up to date on our US savings bonds, which, quite literally, have no place to go but up.

It sort of reminds me of the children's story "The Little Engine That Could":
Starting out is a lot of "I think I can... I think I can... I think I can...." To be finally followed by "I knew I could... I knew I could... I knew I could...."
“Groucho Marx wrote:
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!"
User avatar
Smith1776
Executive Member
Executive Member
Posts: 2214
Joined: Fri Apr 21, 2017 6:01 pm

Re: The Bond Dream Room

Post by Smith1776 » Sat Sep 07, 2019 12:53 am

lol and there's me: the Canadian.

I REALLY feel left out when reading these conversations about EE bonds, I bonds, and the like.

I read these threads and I'm just like "What are these dudes going on about anyway???" :D
GoldSmith PP
“Physics is the universe’s operating system.” — Steven R Garman
"We had a dream of what might be possible five years from now." — Mark Cerny, Lead PS5 System Architect
User avatar
pugchief
Executive Member
Executive Member
Posts: 4331
Joined: Tue Jun 26, 2012 2:41 pm
Location: suburbs of Chicago, IL

Re: The Bond Dream Room

Post by pugchief » Sat Sep 07, 2019 7:42 am

jhogue wrote:
Fri Sep 06, 2019 7:39 pm
You are welcome.

And fortunately we have pugchief.
Man, if you would have just stopped typing here, you would have been right on target. :D
User avatar
Kriegsspiel
Executive Member
Executive Member
Posts: 3484
Joined: Sun Sep 16, 2012 5:28 pm

Re: The Bond Dream Room

Post by Kriegsspiel » Sat Sep 07, 2019 7:50 am

;D smithers you probably know more about US government debt than 90% of Americans. The varieties of bonds aren't too complicated, it's the tax considerations and where you can buy them that are confusing.
[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.
User avatar
Smith1776
Executive Member
Executive Member
Posts: 2214
Joined: Fri Apr 21, 2017 6:01 pm

Re: The Bond Dream Room

Post by Smith1776 » Sun Sep 08, 2019 3:40 am

Kriegsspiel wrote:
Sat Sep 07, 2019 7:50 am
;D smithers
Man, I'm rolling with that s%#t.

smithers.jpg
smithers.jpg (37.46 KiB) Viewed 6317 times

Everyone on the board now has permission to call me smithers.

God I love this forum.
GoldSmith PP
“Physics is the universe’s operating system.” — Steven R Garman
"We had a dream of what might be possible five years from now." — Mark Cerny, Lead PS5 System Architect
User avatar
Ad Orientem
Executive Member
Executive Member
Posts: 3483
Joined: Sun Aug 14, 2011 2:47 pm
Location: Florida USA
Contact:

Re: The Bond Dream Room

Post by Ad Orientem » Mon Sep 09, 2019 9:14 pm

Real US debt levels could be a shocking 2,000% of GDP

https://www.cnbc.com/2019/09/09/real-us ... gests.html
User avatar
ochotona
Executive Member
Executive Member
Posts: 3214
Joined: Fri Jan 30, 2015 5:54 am

Re: The Bond Dream Room

Post by ochotona » Tue Sep 10, 2019 2:49 pm

I felt stupid when I sold my TLT a few days ago.
User avatar
Cortopassi
Executive Member
Executive Member
Posts: 2784
Joined: Mon Feb 24, 2014 2:28 pm
Location: Illinois

Re: The Bond Dream Room

Post by Cortopassi » Tue Sep 10, 2019 3:41 pm

Now you feel good?? ;)
User avatar
Cortopassi
Executive Member
Executive Member
Posts: 2784
Joined: Mon Feb 24, 2014 2:28 pm
Location: Illinois

Re: The Bond Dream Room

Post by Cortopassi » Fri Sep 13, 2019 12:20 pm

TLT sure has come back down to earth. These cycles are quite interesting to watch. Like it picks up speed when rolling downhill.
User avatar
Ad Orientem
Executive Member
Executive Member
Posts: 3483
Joined: Sun Aug 14, 2011 2:47 pm
Location: Florida USA
Contact:

Re: The Bond Dream Room

Post by Ad Orientem » Fri Sep 13, 2019 1:14 pm

Volatility seems to be the new norm. To some degree I'm used to that with stocks and gold. But bonds should not be bouncing all over the place.
User avatar
mathjak107
Executive Member
Executive Member
Posts: 3406
Joined: Fri Jun 19, 2015 2:54 am
Location: bayside queens ny
Contact:

Re: The Bond Dream Room

Post by mathjak107 » Fri Sep 13, 2019 1:47 pm

they have been making moves on par with stocks falling hundreds of points. 1.50-2% falls are a lot
User avatar
ochotona
Executive Member
Executive Member
Posts: 3214
Joined: Fri Jan 30, 2015 5:54 am

Re: The Bond Dream Room

Post by ochotona » Mon Sep 16, 2019 5:05 am

User avatar
sophie
Executive Member
Executive Member
Posts: 4305
Joined: Mon Apr 23, 2012 7:15 pm

Re: The Bond Dream Room

Post by sophie » Mon Sep 16, 2019 8:14 am

I like seeing these kinds of bumps in gold and bonds, because they tell us something very important: despite the rise of cryptocurrencies, low interest rates etc they still operate exactly as the Permanent Portfolio needs them to, during times of market stress.

Next time I check the portfolio, I'll rebalance if indicated or buy lagging assets with the new cash. With no hesitation. And I'm in no hurry!
User avatar
ochotona
Executive Member
Executive Member
Posts: 3214
Joined: Fri Jan 30, 2015 5:54 am

Re: The Bond Dream Room

Post by ochotona » Fri Oct 11, 2019 2:25 pm

“These three new ETFs are designed to address the needs that our clients tell us are most important to them,” Schwab also notes. “We are pleased to offer these new low cost ETFs now, as investors are increasingly looking to bond ETFs as a potential source of diversification, liquidity and income.

The Schwab Long-Term U.S. Treasury ETF SCHQ, -1.02% follows the Bloomberg Barclays US Long Treasury Index and of the three ETFs highlighted here, may be the one destined for the best near-term performance if the Federal Reserve lowers interest rates once or twice before the end of this year.

“Long government funds concentrate on bonds backed by the U.S. government or by government-linked agencies,” according to Schwab. “Because these funds have durations of more than six years, they are more sensitive to interest rates, and thus riskier, than funds that have shorter durations.”
User avatar
Tyler
Executive Member
Executive Member
Posts: 1976
Joined: Sat Nov 12, 2011 3:23 pm
Contact:

Re: The Bond Dream Room

Post by Tyler » Fri Oct 11, 2019 3:07 pm

With an ER of only 0.06%, SCHQ is definitely worth a look for PP investors. That's the same as SPTL and less than half the cost of TLT.
User avatar
pugchief
Executive Member
Executive Member
Posts: 4331
Joined: Tue Jun 26, 2012 2:41 pm
Location: suburbs of Chicago, IL

Re: The Bond Dream Room

Post by pugchief » Fri Oct 11, 2019 5:08 pm

FNGBX (fidelity long term treasury index fund) has an expense ratio of 0.03%
User avatar
ochotona
Executive Member
Executive Member
Posts: 3214
Joined: Fri Jan 30, 2015 5:54 am

Re: The Bond Dream Room

Post by ochotona » Sun Nov 03, 2019 8:00 am

We're now at that weird, sick place where 1-year Jumbo CDs from my local credit union have APR 2.06%, for which you'd have to go out to 20+ years on a US Treasury (sigh).

The ghost of Bernanke, I swear.
Post Reply