options for cash

Discussion of the Cash portion of the Permanent Portfolio

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upside
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options for cash

Post by upside » Wed May 05, 2010 11:20 am

Cash is the only component of the PP that I'm having a hard time with. Are there any treasury money market funds that are still open? Is an ETF just as good/safe for the cash component? How about setting up a t-bill ladder at treasury direct?
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craigr
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Re: options for cash

Post by craigr » Wed May 05, 2010 11:24 am

T-bill ladder is fine. An ETF that purchases t-bills like SHV is fine.

Some people (like me) have mixed in short term treasuries funds along with treasury money markets to bolster the cash not needed for immediate living expenses/emergencies. There is slightly more interest rate doing this, but it's not over the top and generally has better overall performance vs. treasury money markets.
upside
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Re: options for cash

Post by upside » Wed May 05, 2010 12:14 pm

Thanks, Craig. I like the idea of having immediate living expenses/emergencies in a treasury money market. Can anyone point me in the direction of treasury money markets that have low expenses and are still open?
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Re: options for cash

Post by Roy » Wed May 05, 2010 12:20 pm

upside wrote: Thanks, Craig. I like the idea of having immediate living expenses/emergencies in a treasury money market. Can anyone point me in the direction of treasury money markets that have low expenses and are still open?
Vanguard Prime MM is still open.  I don't see much risk in it.  Not as cheap as I'd like but fine for CASH and you can marry it up with ST Treasuries, unless you are wholly inflation adverse. In fact, I am currently sitting in ST Treasuries but may shorten further to MM (all tax deferred).

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Re: options for cash

Post by upside » Wed May 05, 2010 12:29 pm

Roy, I see Vanguard Prime MM has only 18.5% in T-bills. Are there other funds that have 100% in T-bills (or close) that are still open?
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Re: options for cash

Post by doug6zj9 » Wed May 05, 2010 12:48 pm

American Century has the only pure treasury MM I have found that is still open.  Fidelity has one that also includes federal agency debt.  This is not technically the same as treasury bills, but is the next best I think.

upside wrote: Roy, I see Vanguard Prime MM has only 18.5% in T-bills. Are there other funds that have 100% in T-bills (or close) that are still open?
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Re: options for cash

Post by Roy » Wed May 05, 2010 12:54 pm

upside wrote: Roy, I see Vanguard Prime MM has only 18.5% in T-bills. Are there other funds that have 100% in T-bills (or close) that are still open?
No, I think that's the only one left open there, as it has to be for sweep accounts.  I personally would not worry too much on this fund as the credit rating is fine and do not see that particular fund "breaking the buck".  And you can access it without brokerage trading fees, unlike SHV.

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Re: options for cash

Post by craigr » Wed May 05, 2010 1:35 pm

MediumTex has also floated the idea of using I-Bonds for the cash which is another option if you can work within their limits. They would be as safe as t-bills. They are not however a substitute for the LT bonds in the portfolio, nor the gold. FYI.
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Re: options for cash

Post by MediumTex » Wed May 05, 2010 1:57 pm

craigr wrote: MediumTex has also floated the idea of using I-Bonds for the cash which is another option if you can work within their limits. They would be as safe as t-bills. They are not however a substitute for the LT bonds in the portfolio, nor the gold. FYI.
Series EE savings bonds are also fine for a portion of the cash holding.  They are paying a little more than a treasury MM would. 

There are lots of interesting options for the cash piece right now.
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Re: options for cash

Post by MediumTex » Wed May 05, 2010 4:59 pm

Clive wrote: Do you think a 1 to 5 year treasuries (Gilts) ladder would be too excessive for PP's 'cash'?

I ask because in the UK you can ISA (tax free account) gilts with 5 years or more to maturity at the time of purchase, so gross income is retained.  You can't however ISA Gilts with less than 5 years to maturity at the time of purchase.

My thoughts are that you could start with taxable 1 to 4 year steps and ISA the 5th year step, and then buy a 5 year duration Gilt every year in an ISA so that after 5 years all gross income would be non-taxable.

Or would that add too much additional risk?

My guess is that over the longer term the overall up's and down's would cancel each other out and it might therefore be acceptable.
If you know you will hold until maturity and are not otherwise troubled by the extra risk of the longer duration, that seems like a reasonable approach to me.  It's probably about the same as going with VFISX as far as the average maturity goes and it sounds like you have some nice tax benefits as well.
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Re: options for cash

Post by fnord123 » Fri May 07, 2010 7:01 pm

Roy wrote:Vanguard Prime MM is still open.  I don't see much risk in it.  Not as cheap as I'd like but fine for CASH and you can marry it up with ST Treasuries, unless you are wholly inflation adverse. In fact, I am currently sitting in ST Treasuries but may shorten further to MM (all tax deferred).
If one is considering vehicles like Prime MM, then I'd argue CDs are just as safe if not safer as long as one stays under the FDIC insurance limits per institution.  Furthermore, CDs pay significantly higher rates.
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Re: options for cash

Post by Quasimodo » Sun May 16, 2010 10:34 am

American Century's Capital Preservation Fund is open. It is the original T-Bill MMF.

The other suggestions were great.

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