Holding Individual T-Bills for Cash?

Discussion of the Cash portion of the Permanent Portfolio

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MiniB

Holding Individual T-Bills for Cash?

Post by MiniB » Tue Sep 28, 2010 2:13 pm

Harry likes holding individual LT Bonds himself as it reduces counterparty risk by removing a layer between you and your assets.

Did he ever suggest holding individual TBills?

I ask because VG's Treasury MMF is closed, pending a substantial rise in interest rates that would allow it to reopen.  I understand there is an ETF (SHV I think) that holds TBills but it's not something you can easily and cheaply add new money into weekly like a MMF.  Even if you had free trades of SHV, there's still some fluctuations in share value I think, unlike a fixed $1 MMF.

Even after VG's T-MMF reopens, would it make sense to hold TBills?  It seems like a pain in the ass to keep buying new ones at auction every 30 days.  Do any brokerages do it automatically for free? 

Do TBill auctions ALWAYS occur 30 days apart at least, so that this is even possible?  Or would you have to take possession of the money for a few days until the next auction?  If so, then your brokerage would have to hold your cash in their cash sweep account for a few days, and now you added a new layer of risk at least for a few days each month.

The answer is probably no to this question, unless you have huge assets and spend your life managing your money because you have $10M and are retired, then it might work
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MediumTex
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Re: Holding Individual T-Bills for Cash?

Post by MediumTex » Tue Sep 28, 2010 2:25 pm

I would start with SHV and SHY and try holding t-bills after you are comfortable with the overall PP strategy.

The PP can be a bit like a new pair of shoes that take a while to get broken in.  In my view, getting a good comfort level with the overall approach is more important to long term success than in deciding whether SHY/SHV or individual t-bills are more suitable for you on day one.  I would just get started with whatever is simplest, which would probably be SHY/SHV right now, since the treasury money market funds are closed.
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craigr
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Re: Holding Individual T-Bills for Cash?

Post by craigr » Tue Sep 28, 2010 3:13 pm

Treasury Direct does have a rollover feature that could be used with T-Bills. I have only read about it and do not use it though. Sounds like it could be more hassle than it's worth, but here is an article I found describing the process:

http://www.thesunsfinancialdiary.com/in ... e-process/
CaesarI

Re: Holding Individual T-Bills for Cash?

Post by CaesarI » Sat Oct 16, 2010 8:51 pm

I recall HB mentioning holding 1 Yr T Bills directly for the Cash portion on his website when posting annual results. Buy a new one once a year, same time as re-balancing. 30 day bills have a lower yield, and are more work. They're no more liquid, and only moderately more resistant to interest rate changes.
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