Gyroscopic Investing

Where I'm at there is a CU offering a 2.25 15 year loan...put in my loan application last night. This cuts a 1.25 off my current 30 yr. What's crazy is I read something this morning saying they could go lower!

11 pm EST and the 10YT yield is .81%. No, that's not a typo.

This doesn't seem right? TLT up over 5% this morning?

Wow, just WTF is up with bonds today??? I'm rebalancing a couple percent of bonds back into stocks today. This is beyond nuts.

pmward wrote: ↑Fri Mar 06, 2020 9:04 am I'm rebalancing a couple percent of bonds back into stocks today.

Did you hit a band, or are you just taking advantage of the recent swings? As of yesterday, my LTT's are still only at 28%.

drumminj wrote: ↑Fri Mar 06, 2020 9:07 am

pmward wrote: ↑Fri Mar 06, 2020 9:04 am I'm rebalancing a couple percent of bonds back into stocks today.

Did you hit a band, or are you just taking advantage of the recent swings? As of yesterday, my LTT's are still only at 28%.

I generally go more by feel for rebalancing, I'm ~2.5% over allocation on bonds (maybe more after prices are updated on my LTT's this evening), and about equally under on stocks. I'm really tempted to rebalance, because in my trading days anytime I had a ridiculous up day like this and held on to a trade I regretted it. At the same time though, I do believe we have another down leg coming in stocks... and I do think there is a possibility of a 30% correction, which would place us right around those December 2018 lows... and I would love to back the truck up on a big rebalance there. So maybe I should let my winners run and sit on my hands a bit, even though doing so has always bitten me in the past? I'm torn. My initial gut feeling says to rebalance now, but my second thought says to be patient.

pmward wrote: ↑Fri Mar 06, 2020 9:54 am My initial gut feeling says to rebalance now, but my second thought says to be patient.

I have similar urges to try to capture gains with the swings, but then I remember that's not what this allocation is about. As long as the general trend is up and to the right with reduced risk/low draw-downs, it's doing exactly what I want it to.

Sure, I could potentially time the market to capture more gains on each asset as they move up and down, but that's not why I picked this asset allocation.

I'm with you though -- I feel the urge to rebalance a bit out of gold and LTT's given their runs. One thought I had was to donate them to a DAF instead. In a way it's like "locking in" those gains

pmward wrote: ↑Fri Mar 06, 2020 9:54 am

drumminj wrote: ↑Fri Mar 06, 2020 9:07 am

pmward wrote: ↑Fri Mar 06, 2020 9:04 am I'm rebalancing a couple percent of bonds back into stocks today.

Did you hit a band, or are you just taking advantage of the recent swings? As of yesterday, my LTT's are still only at 28%.

I generally go more by feel for rebalancing, I'm ~2.5% over allocation on bonds (maybe more after prices are updated on my LTT's this evening), and about equally under on stocks. I'm really tempted to rebalance, because in my trading days anytime I had a ridiculous up day like this and held on to a trade I regretted it. At the same time though, I do believe we have another down leg coming in stocks... and I do think there is a possibility of a 30% correction, which would place us right around those December 2018 lows... and I would love to back the truck up on a big rebalance there. So maybe I should let my winners run and sit on my hands a bit, even though doing so has always bitten me in the past? I'm torn. My initial gut feeling says to rebalance now, but my second thought says to be patient.

I sense a lot of prognosticating and emotions on rebalancing here. I am still FAR away from all bands (closest is bonds, at 28.9% on a 15-35% band range), and it would be be wrong to rebalance early. I will stick to my once a year plan, or when bands are hit.

My opinion, but I totally understand it. Feels like you are leaving easy money on the table. Which is why I don't do it.

Ugh, I'm going to sit on my hands a bit. With some patience, I can rebalance hopefully around stocks at those 2018 lows. I already put a lot of money into stocks last Friday with a large contribution, and while I'm still up on that money a bit, it's close to going negative... so I'm going to give the winners (long bonds and gold) a bit more room to run. Panic could still get much worse over the coming weeks. But man, this feels like blowoff top territory to me in the bond market...

I do better with my 35/15 rebalance bands than I do with my feelings about the bond market today.

Yeah I didn't trigger the rebalance. So when bonds break down next week you all can blame me, haha. Side note, I am glad it is the weekend now and there are no market happenings to think about for a couple days.

pmward wrote: ↑Fri Mar 06, 2020 3:13 pm Side note, I am glad it is the weekend now

Uh oh, I think I hear Vinny coughing.

Cortopassi wrote: ↑Fri Mar 06, 2020 10:01 am I sense a lot of prognosticating and emotions on rebalancing here. I am still FAR away from all bands (closest is bonds, at 28.9% on a 15-35% band range), and it would be be wrong to rebalance early. I will stick to my once a year plan, or when bands are hit.

My opinion, but I totally understand it. Feels like you are leaving easy money on the table. Which is why I don't do it.

+100!!

I "checked" my portfolio using ETF returns for the appropriate assets dating from my last rebalance in early January. Much easier than totalling everything up across the sprawl of accounts & investments. I'm not even close to crossing a band, so I'm sitting tight. I did some simulations a few years back, and the "momentum" effect of allowing investments doing well to continue to go up is a very important part of the mix. It may be hard to do, but you need to keep your feelings/instincts out of it.

Looking at futures, I'm very glad you all nudged me off the ledge on doing the rebalance on Friday

I don't have enough bonds and that's bad, but my "worst" one is only up 21%. I bought it last month! (Feb 5th). Due 2050, when we'll all be looking at bond prices on the windshields of our flying cars.
Best one is currently up 63%!

The large quantity of 30 year treasuries I purchased at auction last Feb... yes only 1 year and a couple weeks ago... up 50%+. When do stocks ever return like that in 1 year?

pmward wrote: ↑Mon Mar 09, 2020 12:13 pm The large quantity of 30 year treasuries I purchased at auction last Feb... yes only 1 year and a couple weeks ago... up 50%+. When do stocks ever return like that in 1 year?

Another auction buyer! Everyone always asks me why I use an auction and not the secondary market. I don't have a satisfying answer that I can provide.
Do you?

No pressure, but keep in mind that *your answer* could become row 8310 on Vinny's note spreadsheet.

P.S. Just a normal day- EDV is up $15 - Nothing to see here.

dualstow wrote: ↑Mon Mar 09, 2020 12:54 pm

pmward wrote: ↑Mon Mar 09, 2020 12:13 pm The large quantity of 30 year treasuries I purchased at auction last Feb... yes only 1 year and a couple weeks ago... up 50%+. When do stocks ever return like that in 1 year?

Another auction buyer! Everyone always asks me why I use an auction and not the secondary market. I don't have a satisfying answer that I can provide.
Do you?

No pressure, but keep in mind that *your answer* could become row 8310 on Vinny's note spreadsheet.

P.S. Just a normal day- EDV is up $15 - Nothing to see here.

I think I just like the auction. It's kind of fun to put my funds in and wait to see what my winnings are, haha. Fidelity has a really good bond platform. Maybe some day I'll do some secondary purchases. For now though, auction has been working well for me both with my long term and short term holdings.

Interesting. Scratch that, Vinny.
I do it because I trust the auction to to give me a better deal that I could find by actively selecting specific bonds, but I did not think that would be the case for you.

I will go a bit against standard theory...in times like these active rebalancing can be quite fruitful assuming you are not in a taxable account and you have on OK system for when to rebalance. Yes this is market timing and you will have to actively follow the markets until things chill. When things chill, then go back to bands or annual or whatever system it is you are using for when to rebalance.

Or just stick with what you do which it totally fine.

Kbg wrote: ↑Tue Mar 10, 2020 8:27 am I will go a bit against standard theory...in times like these active rebalancing can be quite fruitful assuming you are not in a taxable account and you have on OK system for when to rebalance. Yes this is market timing and you will have to actively follow the markets until things chill. When things chill, then go back to bands or annual or whatever system it is you are using for when to rebalance.

Or just stick with what you do which it totally fine.

FWIW, I just sold some of my most vintage bonds that were not quite at the 20 year mark. No big deal.

Kriegsspiel,

If you don't mind my asking, what did you do with the proceeds? Buy 2050 dated T-bonds?? Buy beaten down stocks???

jhogue wrote: ↑Tue Mar 10, 2020 9:53 am Kriegsspiel,

If you don't mind my asking, what did you do with the proceeds? Buy 2050 dated T-bonds?? Buy beaten down stocks???

It's settling into cash; I'll end up buying stocks with some of it.

Kriegsspiel wrote: ↑Tue Mar 10, 2020 9:24 am FWIW, I just sold some of my most vintage bonds that were not quite at the 20 year mark. No big deal.

I sold 10K worth of notes but they were in the VP and I need the cash. Once again, I don't quite understand why I am entitled to accrued interest but I am happy to receive it.

So, what do we do if real interest rates all along the yield curve turn negative?

1. Use the 35% rebalance band:
-Sell some 30 year T bonds if and when they reach that 35% rebalance band. That should generate a nice pile of cash.

2. Use a low interest rate environment to your financial advantage:
-Now would be a terrific time to refinance or pay off your mortgage, if you have one.
-You might also consider accelerating a new car purchase, if you have been thinking about it. Some of our local auto dealers have recently introduced 72 month auto loans at 0.0% interest.
-Pay off all your credit card balances, if you have any.

3. Don’t accept negative real rates, let alone negative nominal rates.
-Start your own bank run: if rates go negative, close your accounts and demand cash. Make liberal use of your safe deposit box.
-Use the 2% Fidelity Credit Card for all your purchases.
-Buy the lagging asset in the HBPP. This will probably be stocks; maybe some gold.