Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Discussion of the Cash portion of the Permanent Portfolio

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vnatale
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Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by vnatale » Sat Feb 18, 2023 5:21 pm

https://www.bloomberg.com/news/articles ... r-business

Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Six-month bill first US obligation to reach level since 2007

Rate of return on bills competes with earnings yield on stocks
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Re: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by Maddy » Sun Feb 19, 2023 7:02 pm

The 5% rate may be reflecting more than the risk of delayed payment due to the debt ceiling. If it is true that treasury bills are destined to return to the U.S. in droves as the BRIC+ countries solidify agreements intended to circumvent the dollar, then I would ask whether the 5 percent rate is anticipating an overabundance of treasuries and a paucity of buyers. Could this be what they were referring to in 2007-08 as the return of the bond vigilantes?
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Re: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by welderwannabe » Mon Feb 20, 2023 8:38 am

The Fed owns 40% of all the outstanding Treasurys already. They can just crank up purchases if foreigners decide they don't want it.

They will keep the printing presses rolling.
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Re: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by boglerdude » Mon Feb 20, 2023 7:15 pm

We're never going to get sustained deflation. Brief bouts so congress can insider trade on it perhaps. Even Japan's money supply is way up, they eat it with their conforming culture and they build new dense housing

https://fred.stlouisfed.org/series/MYAGM2JPM189S

We just saw the amount of force that can be used to justify money printing. Canada is on the verge of allowing private health care and kids are being pulled from public schools over mRNA mandates and "equality" https://old.reddit.com/r/LosAngeles/com ... districts/

The path is increasing wealth inequality and increasing control of the narrative to distract from it

edit1: https://thesoundingline.com/bank-of-jap ... n-outlier/
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Re: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by Maddy » Tue Feb 21, 2023 5:59 am

welderwannabe wrote:
Mon Feb 20, 2023 8:38 am
The Fed owns 40% of all the outstanding Treasurys already. They can just crank up purchases if foreigners decide they don't want it.

They will keep the printing presses rolling.
Which, if the effect is to just trigger more inflation, could put that 5 percent return in a very different light.

If this is what it takes to stir interest in treasuries, it seems to me that there's a different sort of risk we ought to be talking about.

That said, I bought another 10K last week.
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Re: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by ochotona » Thu Feb 23, 2023 11:07 am

I have no T-Bill maturities before 12/28/2023, because I do not trust Congress. I do have FDIC insured high-yield savings to complement my 10 month+ maturity Treasuries.
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Re: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by welderwannabe » Fri Feb 24, 2023 11:15 am

Maddy wrote:
Tue Feb 21, 2023 5:59 am
Which, if the effect is to just trigger more inflation, could put that 5 percent return in a very different light.

If this is what it takes to stir interest in treasuries, it seems to me that there's a different sort of risk we ought to be talking about.

That said, I bought another 10K last week.
Yes, I keep buying as well. There still isn't any better soverign debt to own, although I think that will change. We can't keep spending the way we are spending without impact.
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Re: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by vnatale » Fri Feb 24, 2023 11:48 am

welderwannabe wrote:
Fri Feb 24, 2023 11:15 am

Maddy wrote:
Tue Feb 21, 2023 5:59 am

Which, if the effect is to just trigger more inflation, could put that 5 percent return in a very different light.

If this is what it takes to stir interest in treasuries, it seems to me that there's a different sort of risk we ought to be talking about.

That said, I bought another 10K last week.


Yes, I keep buying as well. There still isn't any better soverign debt to own, although I think that will change. We can't keep spending the way we are spending without impact.


For how years (decades) has that been said?
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Re: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by boglerdude » Fri Feb 24, 2023 6:44 pm

The impact is here. 40 year high inflation. CPI is a red herring, look at rent and medical. The Fed buys debt now instead of other countries, using new money
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Re: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by dualstow » Fri Feb 24, 2023 6:50 pm

I think i started my pp around 2008 and for nearly all of that time, people have been complaining about cash. Obviously, inflation sucks and the real return is not good at all. Still, it’s amazing to see a nominal risk-free return of 5% from 6-month bills in real life, and not just in books published in the 1980’s.
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Re: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by vnatale » Fri Feb 24, 2023 6:55 pm

dualstow wrote:
Fri Feb 24, 2023 6:50 pm

I think i started my pp around 2008 and for nearly all of that time, people have been complaining about cash. Obviously, inflation sucks and the real return is not good at all. Still, it’s amazing to see a nominal risk-free return of 5% from 6-month bills in real life, and not just in books published in the 1980’s.


I seem to remember getting about 5% in my Prime Money Market Fund in 2007. What were 6-months bills paying in 2007?
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Re: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by boglerdude » Fri Feb 24, 2023 7:20 pm

~5% 2007. Wall St, who insure each others investments and made themselves too big to fail, will get another bailout. What'll be the distraction next time
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Re: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by vnatale » Fri Feb 24, 2023 7:55 pm

boglerdude wrote:
Fri Feb 24, 2023 7:20 pm

~5% 2007. Wall St, who insure each others investments and made themselves too big to fail, will get another bailout. What'll be the distraction next time


Then, of course, it went down to nearly 0% in the 2008 / 2009 financial crisis where is somewhat stayed at that level until just this past year?

14 or so years of almost zero interest.
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Re: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by dualstow » Sat Feb 25, 2023 5:53 am

Interesting. I didn’t have a pp then, but I certainly had Prime. I don’t remember that great yield, especially not as a %.
And of course it paled in comparison to what stocks were doing in 2007.
I only remember the disaster that everyone else remembers.
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Re: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by welderwannabe » Sat Feb 25, 2023 11:08 am

vnatale wrote:
Fri Feb 24, 2023 11:48 am
For how years (decades) has that been said?
Fair, but debt as a percent of GDP is 3X what it was not too long ago. Its really exploded in the last few years.

There has to be an upper limit, just no one knows what it is. Some would argue we've already hit and thats a reason why inflation has been so nuts. You can't print money and hand it out without impact forever.
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Re: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by vnatale » Sun Feb 26, 2023 9:25 am

welderwannabe wrote:
Sat Feb 25, 2023 11:08 am

vnatale wrote:
Fri Feb 24, 2023 11:48 am

For how years (decades) has that been said?


Fair, but debt as a percent of GDP is 3X what it was not too long ago. Its really exploded in the last few years.

There has to be an upper limit, just no one knows what it is. Some would argue we've already hit and thats a reason why inflation has been so nuts. You can't print money and hand it out without impact forever.


Definitely agree with all you have to say but isn't it somewhat similar to the common saying about when one thinks the stock prices are way too high but that the stock market does not care what you think.

https://realmoney.thestreet.com/investi ... 0a%20trend.

"For many market players it is just a matter of time before a day of reckoning will occur but as John Maynard Keynes supposedly once said, "The market can remain irrational longer than you can remain solvent". That observation is particularly important when someone is fighting a trend. Trends always seem to last longer and go further than seem reasonable."
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Re: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by welderwannabe » Mon Feb 27, 2023 7:57 am

vnatale wrote:
Sun Feb 26, 2023 9:25 am
Definitely agree with all you have to say but isn't it somewhat similar to the common saying about when one thinks the stock prices are way too high but that the stock market does not care what you think.
Well the two are closely related IMHO. When rates are uber low for long, and the govt prints endless money it causes asset prices to increase.

What will be interesting is to see if, with rates as high as they are right now, will we see sustained asset devaluation? Not sure, but its gonna be fun to watch on one hand, and scary as heck on the other.
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Re: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by vnatale » Mon Feb 27, 2023 8:45 am

https://www.msn.com/en-us/money/markets ... r-AA17Y9Xl


FOX News

Spending shocker: CBO's latest debt projection should stun even Washington
Story by Chad Pergram • Yesterday 9:35 PM



The most staggering thing about a recent report about the nation’s fiscal health wasn’t that lawmakers must lift the debt ceiling this summer or the nation could default.

We’ve known that for a while – although the drop-dead date is fudgy at best.

The most shocking thing is what shouldn’t be shocking. It hasn’t been shocking for decades now. And each time we’re still shocked. But a few years later, we’re even more shocked and the old shock seems passé.

So, the most shocking thing?

The sheer level of debt that the Congressional Budget Office (CBO) projects that the U.S. will carry in the next few years.

The current debt the U.S. owes is $31.4 trillion. But the CBO estimates the federal government will accumulate an eye-popping $19 trillion in debt over the next decade. New laws passed by Congress since last year will account for $1.5 trillion of that debt. The CBO augers that the Inflation Reduction Act (IRA) and the infrastructure bill will tack on an additional $3 trillion in debt which wasn’t anticipated around this time last year.
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: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by jalanlong » Sun Jun 04, 2023 9:28 pm

vnatale wrote:
Mon Feb 27, 2023 8:45 am
https://www.msn.com/en-us/money/markets ... r-AA17Y9Xl


FOX News

Spending shocker: CBO's latest debt projection should stun even Washington
Story by Chad Pergram • Yesterday 9:35 PM

The most staggering thing about a recent report about the nation’s fiscal health wasn’t that lawmakers must lift the debt ceiling this summer or the nation could default.

We’ve known that for a while – although the drop-dead date is fudgy at best.

The most shocking thing is what shouldn’t be shocking. It hasn’t been shocking for decades now. And each time we’re still shocked. But a few years later, we’re even more shocked and the old shock seems passé.

So, the most shocking thing?

The sheer level of debt that the Congressional Budget Office (CBO) projects that the U.S. will carry in the next few years.

The current debt the U.S. owes is $31.4 trillion. But the CBO estimates the federal government will accumulate an eye-popping $19 trillion in debt over the next decade. New laws passed by Congress since last year will account for $1.5 trillion of that debt. The CBO augers that the Inflation Reduction Act (IRA) and the infrastructure bill will tack on an additional $3 trillion in debt which wasn’t anticipated around this time last year.
So how does one prepare a portfolio to protect their money in a country with that debt level? 50/50 Gold and Stocks?

Cullen Roche would argue that the Federal Government has a healthy asset side of the ledger as well and could easily erase a large chunk of debt by selling off some of the vast holdings of Federal Land or gold reserves. I am not aware that discussions like that have ever taken place seriously before.
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Re: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by boglerdude » Sun Jun 04, 2023 11:37 pm

"There are 4 kind of economies: developed, undeveloped, japan and Argentina"

Japan/BOJ owes debt to itself which it could just erase. Argentina owes it to others. Real debt.
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Re: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by barrett » Mon Jun 05, 2023 3:39 am

And yet there are also some bright spots in the data. Yes, the US debt has gone up way to high but GDP is also up nearly five trillion $ since before the pandemic. This is from FRED:

https://fred.stlouisfed.org/series/GDP

While the debt to GDP ratio has come down from 135 to 119 since Q2 of 2020. Again from FRED:

https://fred.stlouisfed.org/series/GFDEGDQ188S

Of course, inflation is pushing the GDP numbers up, so in real terms GDP is only up about 5% since before the pandemic. Here is that graph:

https://fred.stlouisfed.org/series/GFDEGDQ188S
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Re: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by dualstow » Mon Jun 05, 2023 7:38 am

@Vinny, wasn’t Prime commercial paper?
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Re: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by vnatale » Mon Jun 05, 2023 9:09 am

dualstow wrote:
Mon Jun 05, 2023 7:38 am

@Vinny, wasn’t Prime commercial paper?


I believe so. I was in it for decades and moved out of it once I wanted my money market funds to be as much Treasury as possible.

Is Prime no longer?
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Re: Treasury Bills Offer Stock-Like 5% to Take Fed, Debt-Limit Risk

Post by dualstow » Mon Jun 05, 2023 10:08 am

Correct. Prime is no longer in existence.
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