The Bond Dream Room

Discussion of the Bond portion of the Permanent Portfolio

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pmward
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Re: The Bond Dream Room

Post by pmward » Fri Aug 16, 2019 5:34 pm

ochotona wrote:
Fri Aug 16, 2019 2:42 pm
I showed my TLT chart to my wife she told me to sell some. I did when my tight trailing stop alert went off. More and more cash...
I'm not so sure cash is any better of an investment at this point in time. Cash is turning back into a fixed expense, lol. Seems to me like maybe trading something likely to go up for something almost sure to go down.
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Re: The Bond Dream Room

Post by sophie » Sat Aug 17, 2019 1:56 pm

ochotona wrote:
Fri Aug 16, 2019 4:49 pm
She's a scientist so she knows how to read charts and graphs. She also has that woman's intuition for when something is a good deal and when it is overpriced.
I'm trying very hard not to be offended by this discussion, but I'm failing miserably.

So it's my "women's intuition" that gets me publications in Nature journals, is it? And you're graciously admitting I might just know how to read charts and graphs? Geez guys...here's a news flash for you: your wives are intelligent human beings whose interests might or might not align with yours. We are not, contrary to popular belief, a different species of house pet.
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ochotona
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Re: The Bond Dream Room

Post by ochotona » Sat Aug 17, 2019 2:16 pm

sophie wrote:
Sat Aug 17, 2019 1:56 pm
ochotona wrote:
Fri Aug 16, 2019 4:49 pm
She's a scientist so she knows how to read charts and graphs. She also has that woman's intuition for when something is a good deal and when it is overpriced.
I'm trying very hard not to be offended by this discussion, but I'm failing miserably.

So it's my "women's intuition" that gets me publications in Nature journals, is it? And you're graciously admitting I might just know how to read charts and graphs? Geez guys...here's a news flash for you: your wives are intelligent human beings whose interests might or might not align with yours. We are not, contrary to popular belief, a different species of house pet.
I'm sorry, but you need to take a stress pill and think it over. I wasn't referring to you, I was referring to my wife. Also, she's the one who often talks about intuitive feminine ways of knowing, and how men lack them and get into trouble because they are wrapped up in their own head and their own ideas about how things should be instead of seeing how things are. Put another way by Dave Ramsey, "Men have no risk bone".

Men will talk and theorize about agricultural trade policy, and women do too, but women in many households are more prone to have to buy food and feed their families, which gives them more insights of a gut-level type.
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Re: The Bond Dream Room

Post by dualstow » Sat Aug 17, 2019 2:16 pm

In case I'm one of the guys in "geez guys", let me just reiterate that she has the smarts but not the interest.
Feels like the end of the everything rally.
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Re: The Bond Dream Room

Post by Smith1776 » Sat Aug 17, 2019 3:05 pm

I've read some of the behavioural economics stuff dealing in this area of men vs. women in investing.

I don't doubt that women have just as good a capacity to understand stock market numbers, charts, and graphs as men do.

However, my understanding is that women generally get better investment results than men because they don't bother with paying attention to that data. Easier to stay the course when you ignore all that.
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Re: The Bond Dream Room

Post by pmward » Tue Aug 27, 2019 4:22 pm

And we have another all-time high close in TLT. This bond rally just doesn't want to quit.
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Re: The Bond Dream Room

Post by Ad Orientem » Tue Aug 27, 2019 5:05 pm

30 yr Treasury currently yield 1.95%
VOO current dividend 2.03%

Not seen that in a very long time.
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Re: The Bond Dream Room

Post by pugchief » Tue Aug 27, 2019 8:13 pm

Ad Orientem wrote:
Tue Aug 27, 2019 5:05 pm
30 yr Treasury currently yield 1.95%
VOO current dividend 2.03%

Not seen that in a very long time.
And that's supposed to indicate that stocks are a screaming BUY.
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Re: The Bond Dream Room

Post by ochotona » Wed Aug 28, 2019 8:06 am

I'm just not getting excited about putting new money into TLT right here...

https://i2.wp.com/northmantrader.com/wp ... .png?ssl=1

For years and years, after TLT has hit the top of that trend, 6, 12, or 18 months later, investors were regretting buying at the peak.
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Re: The Bond Dream Room

Post by sophie » Wed Aug 28, 2019 8:20 am

Eh, that's what I was saying to myself when the 30 year yield was 2.5%.

Speaking of which, anyone hit a rebalance band yet?
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Re: The Bond Dream Room

Post by Ugly_Bird » Wed Aug 28, 2019 8:31 am

sophie wrote:
Wed Aug 28, 2019 8:20 am
Speaking of which, anyone hit a rebalance band yet?
After this LTT and Au surge, mine is pretty well balanced now :-)
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Re: The Bond Dream Room

Post by Kbg » Wed Aug 28, 2019 8:38 am

In some other stuff I read, supposedly the gap between US interest rates and the rest of the world is projected to close and hence the movement in i-rates down.
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Re: The Bond Dream Room

Post by dualstow » Wed Aug 28, 2019 9:04 am

sophie wrote:
Wed Aug 28, 2019 8:20 am
Eh, that's what I was saying to myself when the 30 year yield was 2.5%.

Speaking of which, anyone hit a rebalance band yet?
I might have if i hadn’t stupidly sold my “worst” bonds in 2018. With bonds up so much but still underweight in my allocation due to the sale, I guess I have to leave it alone.

Certainly not complaining though. It’s nice to see all four assets well in the black. O0
Feels like the end of the everything rally.
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Re: The Bond Dream Room

Post by pmward » Wed Aug 28, 2019 11:37 am

ochotona wrote:
Wed Aug 28, 2019 8:06 am
I'm just not getting excited about putting new money into TLT right here...

https://i2.wp.com/northmantrader.com/wp ... .png?ssl=1

For years and years, after TLT has hit the top of that trend, 6, 12, or 18 months later, investors were regretting buying at the peak.
I would still put money into TLT in the PP for a long term hold at this point. Even if odds of large return in the short timeframe you listed is not particularly high, the odds of large return on the longer term is still intact. I think the problem right now is that these markets are currently impossible to read on the short timeframe you listed. It's really a coin flip for each asset as to whether or not it will go up, tread sideways, or go down. Nobody has any clue what is going to happen right now. So personally, in my GB if on a DCA day bonds were my lowest asset, I would still put fresh cash into them even at the top of the channel. Now, that obviously hasn't happened in some time as bonds have rallied like crazy so most of my fresh money has been going into cash and stocks (ugh those small caps in particular, if anything the small caps are the asset that I'm loathe to be holding at the moment as technically they just have not a single sign of life going on; I'm very tempted to start moving some of these over to REIT's but selling an asset low to buy an asset high is something I find hard to pull the trigger on).
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Re: The Bond Dream Room

Post by ochotona » Wed Aug 28, 2019 12:12 pm

pmward wrote:
Wed Aug 28, 2019 11:37 am
So personally, in my GB if on a DCA day bonds were my lowest asset, I would still put fresh cash into them even at the top of the channel. Now, that obviously hasn't happened in some time as bonds have rallied like crazy so most of my fresh money has been going into cash and stocks (ugh those small caps in particular, if anything the small caps are the asset that I'm loathe to be holding at the moment as technically they just have not a single sign of life going on; I'm very tempted to start moving some of these over to REIT's but selling an asset low to buy an asset high is something I find hard to pull the trigger on).

The weird thing is, and it's 100% in my head, once I have owned an asset "for a few months", I don't care what it does, but if it goes against me right after I buy it, I take it hard. In other words, there is a lag time until the Endowment Effect takes hold in my brain. Have you noticed the same?
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Re: The Bond Dream Room

Post by pmward » Wed Aug 28, 2019 12:23 pm

ochotona wrote:
Wed Aug 28, 2019 12:12 pm
pmward wrote:
Wed Aug 28, 2019 11:37 am
So personally, in my GB if on a DCA day bonds were my lowest asset, I would still put fresh cash into them even at the top of the channel. Now, that obviously hasn't happened in some time as bonds have rallied like crazy so most of my fresh money has been going into cash and stocks (ugh those small caps in particular, if anything the small caps are the asset that I'm loathe to be holding at the moment as technically they just have not a single sign of life going on; I'm very tempted to start moving some of these over to REIT's but selling an asset low to buy an asset high is something I find hard to pull the trigger on).

The weird thing is, and it's 100% in my head, once I have owned an asset "for a few months", I don't care what it does, but if it goes against me right after I buy it, I take it hard. In other words, there is a lag time until the Endowment Effect takes hold in my brain. Have you noticed the same?
When I was trading I used to big time. I was a swing trader, so my goal was usually one week to couple month hold. What used to kill me is when I would buy something and it would close the first day down from my purchase price. Since I've moved away from trading into the GB I do not find this particularly bothersome. I think it also helps that I'm DCA'ing every 2 weeks, so I've got money going in so often to so many assets that I just pay less attention. Small caps though have been frustrating me lately. Seeing them obviously in a downtrend with no hope of life anytime in the near future has really tested my patience. Matter of fact, F it, I'm just going to do it. I'm going to move half my small cap VP over to REIT's. I did some research and the DFA REIT available in my 401k has a 4.3% yield and has been holding up nicely during the recent volatility. In my IRA I can buy any REIT ETF I want. So I think I'm going to pull the trigger. I just have no real hope for small caps in the next couple years at least. So reducing that to 10% and adding 10% REIT's seems like a decent tactical move for the next little while, at least until this unpredictable volatility gets sorted out and small caps start a new uptrend.
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Re: The Bond Dream Room

Post by pmward » Wed Aug 28, 2019 12:28 pm

And it is done. Current target allocation 20% TSM, 20% long bonds, 20% cash (or equivalent), 10% Small cap blend (S&P 600 preference where possible), 10% REIT. I feel much better now. So you all can officially sell REIT's to buy small caps now, since this is of course likely going to blow up in my face, hahaha.
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Re: The Bond Dream Room

Post by sophie » Thu Aug 29, 2019 4:48 am

Just checked the portfolio, and I'm not even close to hitting a rebalance band. Darn the PP for being so stable! On the other hand stocks haven't really dropped by much.

pmward, look out for the constantly shifting target allocation game. It's market timing in disguise and will get you to the same place, which is about a 95% chance of underperforming a passive strategy in the long run.
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Re: The Bond Dream Room

Post by flyingpylon » Thu Aug 29, 2019 8:19 am

What I find irritating is when an asset class has a run that brings you to within a percentage point or two of a rebalancing band but you hesitate to avoid pulling the trigger too soon, and then it retreats. It happened to me with stocks and now I'm mentally preparing myself for it to happen again with bonds or gold.

Of course you only know about that if you're checking frequently enough to notice. ;)
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Re: The Bond Dream Room

Post by Kbg » Thu Aug 29, 2019 11:28 am

Perhaps we overthink this too much, most studies indicate rebalancing doesn’t make a huge difference one way or another and if you peel the skin back you quickly realize rebalancing strategy winners and losers are a function of path dependency.

So what is concrete and knowable (or can be knowable) with a little bit of effort?

Tax impact

Trading costs

The latter isn’t really that big a deal anymore unless you are doing it frequently.

Conclusion: If you are in a tax deferred account and you’ve considered trading costs, if it makes you feel better and more able to stick with your strategy, pull the trigger.
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Re: The Bond Dream Room

Post by dualstow » Thu Aug 29, 2019 11:45 am

Kbg wrote:
Thu Aug 29, 2019 11:28 am
Perhaps we overthink this too much
I overthink just enough O0
Feels like the end of the everything rally.
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Re: The Bond Dream Room

Post by ochotona » Sun Sep 01, 2019 8:55 pm

WOLF THINKS WE'RE ALL GETTING PLAYED BY THE BOND PLAYERS

https://youtu.be/irsgR3u256E

We've gotten played before... why not now? What if this recession talk is partly just bond traders talking their book and jawboning yield down? The hard data is slowing, but we're not in a recession.

And then this comes to mind again and again...

What if Trump just needs low rates so he can service his own business debt? Occam's Razor, people.. the man is greedy, self-serving son-of-a-binch. He frickin' was marketing Doral the other day in press conferences!
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Re: The Bond Dream Room

Post by Smith1776 » Sun Sep 01, 2019 9:41 pm

One thing that I really love about the PP is how it makes it so that I don't have to think about interest rates, yield curve inversion, credit risk, or anything of the sort.

A while ago I was talking to a few coworkers and they kept trying to game up strategies and discuss what the yield curve and interest rate environment meant for their investment approaches. Naturally, everyone had their own opinion. People wanted to dial down their duration. Then all of the sudden there was lamentation that the long bonds were actually outperforming. But was it now too late?

With the PP we can just sit back and relax. 8)

Yes, I'm guilty of tinkering with the stock allocation as per my latest post in the stock scream room, but I'm cool as a cucumber in most respects.
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Re: The Bond Dream Room

Post by Kriegsspiel » Mon Sep 02, 2019 5:57 am

ochotona wrote:
Sun Sep 01, 2019 8:55 pm
WOLF THINKS WE'RE ALL GETTING PLAYED BY THE BOND PLAYERS

https://youtu.be/irsgR3u256E
I like that guys voice. He does a great job aping El-Erian's speech impediment ;D
What if Trump just needs low rates so he can service his own business debt? Occam's Razor, people.. the man is greedy, self-serving son-of-a-binch. He frickin' was marketing Doral the other day in press conferences!
Wouldn't the simplest explanation be that Trump just wants the economy to be ok during his tenure? I would think the fact that he's a businessman would add weight to that explanation. So even if he is greedy and self-serving (which both seem true), his interests are aligned with America's, right? Or at the least, he's kicking the can down the road like everyone else excepting Volcker. Am I missing something?
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Re: The Bond Dream Room

Post by pmward » Mon Sep 02, 2019 9:39 am

ochotona wrote:
Sun Sep 01, 2019 8:55 pm
WOLF THINKS WE'RE ALL GETTING PLAYED BY THE BOND PLAYERS

https://youtu.be/irsgR3u256E

We've gotten played before... why not now? What if this recession talk is partly just bond traders talking their book and jawboning yield down? The hard data is slowing, but we're not in a recession.

The U.S. treasury bond market is simply too large and too liquid to be manipulated like that. I mean, even the Fed has a hard time controlling the bond market. No we are not in a recession, but defensives like bonds usually rally BEFORE the recession. Matter of fact, it's usually after the yield curve begins to steepen that the recession is officially declared. We have not had a steepening yet. So yes, it makes total sense that we are not declared to be in a recession yet. There are so many deflationary pressures globally, and global central banks that keep pushing rates lower and lower. The U.S. has no choice but to ease, because not easing is essentially tightening when the rest of the world keeps going more and more negative. This is what is really pushing our yields down, it's more of a global phenomenon than anything else. And as much as I do believe a recession is coming in the short to medium term, I also would not be surprised if it didn't come, and if this whole inversion was simply led by foreigners chasing yield. I do not think the bond rally is overdone just yet. I think we still have a lot of room for a true blowoff top to end the almost 40 year old bull market. 30 year bond sub 1% would not surprise me at all by the time this whole cycle is said and done. Matter of fact, I would be surprised if we didn't get below 1% by the end of the cycle.

Let us not also forget that the large amount of government debt that we have pretty much guarantees that the Fed needs to keep rates artificially low. So, even though bonds have come a long way, there is a very limited downside potential. For now, the Fed still has our backs, so bonds are still a safe trade and there is nothing to worry about aside from AT MOST maybe a short term correction. So long story short, I do not think that your fears are justified. The real risk to bonds is if/when inflation actually starts to pick up, because the Fed will be forced to keep rates low to allow servicing of the debt, and that will cause some chaos and destruction. But I do not see inflation in the near term, especially with the trade war, which even though it does increase prices, it is a tax, and taxes at the end of the day have a tightening effect on the economy.
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