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Cash in an inverted bond market

Posted: Sun Mar 24, 2019 11:26 am
by Ad Orientem
VGSH, SHY, SHV, and BIL are all offering crazy yields.

Re: Cash in an inverted bond market

Posted: Sun Mar 24, 2019 11:47 am
by ochotona
If there is a risk of rates going *down* why not buy some CDs? I was thinking about this after I got an advert from my bank.

Re: Cash in an inverted bond market

Posted: Sun Mar 24, 2019 1:40 pm
by Dieter
Isn't there always a risk of rates going down, up, or staying the same? :)

Although for the last what, 10 years(? More), Have nowhere to go but up......

Re: Cash in an inverted bond market

Posted: Sun Mar 24, 2019 2:12 pm
by ochotona
This new guy Trump wants on the Fed Reserve Board wants to lower rates more. The "dot plot" got all dovish last week. It's not a matter of guessing, listen to what these people want to do. More financial suppression.

Re: Cash in an inverted bond market

Posted: Sun Mar 24, 2019 10:32 pm
by Hal
From Benjamin Graham in "The Intelligent Investor"
<snip>
Savings Deposits in Lieu of Bonds
An investor may now obtain as high an interest rate from a savings deposit in a commercial or savings bank (or from a bank certificate of deposit) as he can from a first-grade bond of short maturity. The interest rate on bank savings accounts may be lowered in the future, but under present conditions they are a suitable substitute for short-term bond investment by the individual.
<snip>

Re: Cash in an inverted bond market

Posted: Mon Mar 25, 2019 8:19 am
by dualstow
Dieter wrote:
Sun Mar 24, 2019 1:40 pm
Isn't there always a risk of rates going down, up, or staying the same? :)

Although for the last what, 10 years(? More), Have nowhere to go but up......
+1

Re: Cash in an inverted bond market

Posted: Mon Mar 25, 2019 3:08 pm
by jacksonM
dualstow wrote:
Mon Mar 25, 2019 8:19 am
Dieter wrote:
Sun Mar 24, 2019 1:40 pm
Isn't there always a risk of rates going down, up, or staying the same? :)

Although for the last what, 10 years(? More), Have nowhere to go but up......
+1
I think it's been more than 10 years if memory is serving me correctly.

When my parents retired they were saying the exact opposite which turned out to be true because LTT's were paying around 14% at the time. Short term CD's were offering even 4% more than that so they made the mistake of chasing yield instead of locking in some long term guaranteed gains.

Can't help but wonder how much more money they would have had reading Harry Browne's book and following his advice. I think they would have had a very hard time selling a 14% bond to re-balance the portfolio or buy new ones when they were less than 20 years to maturity, as I'm sure I would too, but in the long term the whole PP strategy, if they had followed it, would have increased the size of their portfolio by an order of magnitude beyond what they ended up with when they died. And simple math and charts on the internet prove that very well.

Re: Cash in an inverted bond market

Posted: Mon Mar 25, 2019 5:45 pm
by dualstow
jacksonM wrote:
Mon Mar 25, 2019 3:08 pm
dualstow wrote:
Mon Mar 25, 2019 8:19 am
Dieter wrote:
Sun Mar 24, 2019 1:40 pm
Isn't there always a risk of rates going down, up, or staying the same? :)

Although for the last what, 10 years(? More), Have nowhere to go but up......
+1
I think it's been more than 10 years if memory is serving me correctly.

When my parents retired they were saying the exact opposite which turned out to be true because LTT's were paying around 14% at the time. Short term CD's were offering even 4% more than that so they made the mistake of chasing yield instead of locking in some long term guaranteed gains.

Can't help but wonder how much more money they would have had reading Harry Browne's book and following his advice. I think they would have had a very hard time selling a 14% bond to re-balance the portfolio or buy new ones when they were less than 20 years to maturity, as I'm sure I would too, but in the long term the whole PP strategy, if they had followed it, would have increased the size of their portfolio by an order of magnitude beyond what they ended up with when they died. And simple math and charts on the internet prove that very well.
As the Chinese saying goes, good medicine tastes bitter.