Understanding Cash Will Make You a Happier Investor (Tyler)

Discussion of the Cash portion of the Permanent Portfolio

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grapesofwrath
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Re: Understanding Cash Will Make You a Happier Investor (Tyler)

Post by grapesofwrath » Mon May 15, 2017 8:11 pm

sophie wrote:I wonder if anyone thought that autorolling Treasuries might spell the death of Treasury money market funds, with their high (0.4%+) ERs.
One day I was horrified to discover that 70-80% of my treasury cash yield at a Schwab fund was being sucked up by their "expenses". So I decided to just use Tbills instead. Also I don't really have a need for cash and I don't have the stomach for 20yr bonds so I decided to combine short and long and set up a ~5yr (intermediate) treasury ladder. I intend to hold to maturity so Treasury Direct seemed OK. I also liked the instituitional diversification of not having all at brokerage. I started setting ladder up by buying 1,2,3 and 5 year notes in the first year, second year fill in the gaps with 3 and 5 year purchases and then just let it roll from there. I may add 7yr notes.
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Re: Understanding Cash Will Make You a Happier Investor (Tyler)

Post by barrett » Tue May 16, 2017 8:04 am

sophie wrote:...CDs are great for taxable cash, but Barrett was asking about a retirement account...
Sophie, why would it make a difference if the CDs were held in an IRA? I am just trying to generate a bit of yield on the cash in my IRA. Thanks.
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Re: Understanding Cash Will Make You a Happier Investor (Tyler)

Post by Desert » Tue May 16, 2017 8:51 am

grapesofwrath wrote:
sophie wrote:I wonder if anyone thought that autorolling Treasuries might spell the death of Treasury money market funds, with their high (0.4%+) ERs.
One day I was horrified to discover that 70-80% of my treasury cash yield at a Schwab fund was being sucked up by their "expenses". So I decided to just use Tbills instead. Also I don't really have a need for cash and I don't have the stomach for 20yr bonds so I decided to combine short and long and set up a ~5yr (intermediate) treasury ladder. I intend to hold to maturity so Treasury Direct seemed OK. I also liked the instituitional diversification of not having all at brokerage. I started setting ladder up by buying 1,2,3 and 5 year notes in the first year, second year fill in the gaps with 3 and 5 year purchases and then just let it roll from there. I may add 7yr notes.
This is the simplest solution. The past performance of a PP with 50% allocation to intermediate treasuries is nearly identical to that of a PP with a 25/25 cash/LTT allocation.
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Re: Understanding Cash Will Make You a Happier Investor (Tyler)

Post by Jeffreyalan » Tue May 16, 2017 3:30 pm

Do most of you keep your cash in Treasury Direct? Or in a brokerage?
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Re: Understanding Cash Will Make You a Happier Investor (Tyler)

Post by Jack Jones » Wed May 17, 2017 12:56 pm

Brokerage for me.
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Re: Understanding Cash Will Make You a Happier Investor (Tyler)

Post by dualstow » Wed May 17, 2017 5:03 pm

Jack Jones wrote:Brokerage for me.
Me too.
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Re: Understanding Cash Will Make You a Happier Investor (Tyler)

Post by dualstow » Wed May 17, 2017 9:52 pm

dualstow wrote:Could you guys explain how you're calculating it? I don't know how it's done.

I just know that I have bills and notes (up to 3-year notes), so I can see individually how they're doing.
For example, the $10,000 block ending in ~LF4 2017-Jun-29 (bought as a 26-week t-bill) is up $27.
The $10,000 block ending in ~R44, due 2019-MAY-15 (bought as a 3-year note) is down $84.
Yes, I'm going to get my money back, but when I add up everything (cost vs holding value, but not interest paid), it's down...


Well it's up now ;-)
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Re: Understanding Cash Will Make You a Happier Investor (Tyler)

Post by grapesofwrath » Thu May 18, 2017 6:21 am

dualstow wrote:
dualstow wrote:Could you guys explain how you're calculating it? I don't know how it's done.

I just know that I have bills and notes (up to 3-year notes), so I can see individually how they're doing.
For example, the $10,000 block ending in ~LF4 2017-Jun-29 (bought as a 26-week t-bill) is up $27.
The $10,000 block ending in ~R44, due 2019-MAY-15 (bought as a 3-year note) is down $84.
Yes, I'm going to get my money back, but when I add up everything (cost vs holding value, but not interest paid), it's down...


Well it's up now ;-)
This is another reason I prefer holding my bills/notes at treasury direct rather than a brokerage. A brokerage tends to prominently display the daily current market value of each of your bill/note/bond. As far as I'm aware TD doesn't show this (or I haven't seen it and not looked for it). As interest rates rise/fall above what you bought your bill/note/bond for its value on the market (if you tried to sell it) will fall/rise. This daily loss/gain displayed in reds and greens is a distraction to me and fear it may tempt me to do something stupid like figure out which way interest rates are headed... I'm trying to get into a mode of been oblivious and trying not to care.
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Re: Understanding Cash Will Make You a Happier Investor (Tyler)

Post by dualstow » Thu May 18, 2017 6:32 am

Or you could always ... not look. ;-)
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Re: Understanding Cash Will Make You a Happier Investor (Tyler)

Post by sophie » Thu May 18, 2017 6:53 am

Jeffreyalan wrote:Do most of you keep your cash in Treasury Direct? Or in a brokerage?
Deep cash at Treasury direct. "Shallow" cash in bank savings account. All other cash in brokerage as autorolled T bills. But that's not a hard and fast plan. I figure I'll be moving more cash into Treasury Direct, especially given that autorolled T bills will give approximately the same return as the bank savings account & CDs, after taxes.

Banks should be ashamed of themselves...interest rates have barely budged despite the jump in Treasuries.
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Re: Understanding Cash Will Make You a Happier Investor (Tyler)

Post by eufo » Thu May 18, 2017 8:20 am

sophie wrote:Banks should be ashamed of themselves...interest rates have barely budged despite the jump in Treasuries.
Agree. Chase keeps sending me a deal for $200 to deposit $15,000 into one of their savings accounts and leave it for 90 days. It's actually a good deal except that I will have to pretty much instantly close the account because of the 0.03% APY. Is it worth $200 to have to move money around, open the account, wait 90 days, monitor until the money goes in, close the account and shuffle money back where I want it? No.

Hey, Chase... up the interest rate on your savings and I'll just have a savings account with you instead of somewhere else. It's that simple.
Don't agree with me too strongly or I'm going to change my mind
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Re: Understanding Cash Will Make You a Happier Investor (Tyler)

Post by pugchief » Thu May 18, 2017 11:00 am

eufo wrote:
sophie wrote:Banks should be ashamed of themselves...interest rates have barely budged despite the jump in Treasuries.
Agree. Chase keeps sending me a deal for $200 to deposit $15,000 into one of their savings accounts and leave it for 90 days. It's actually a good deal except that I will have to pretty much instantly close the account because of the 0.03% APY. Is it worth $200 to have to move money around, open the account, wait 90 days, monitor until the money goes in, close the account and shuffle money back where I want it? No.

Hey, Chase... up the interest rate on your savings and I'll just have a savings account with you instead of somewhere else. It's that simple.
Ha. They are never going to do that. Their profit model is to rip-off the people who don't know better or are too lazy to [or can't] move their money elsewhere. Then add in the lure of easy 'free' money to open the account. Most people will just leave it there once the account is established.
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