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Old 06-10-2013, 02:53 PM   #41
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And a week after worrying about investing in stock funds the last thing i expected was for the bond funds to drop so much. Investing builds character.
just go back, lots of people have told you that if interest rates rise, bond funds will not go down, or if they do, not much, and anyway it won't matter whatever they do.

So who you gonna believe, us or your lying eyes?

Ha
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Old 06-10-2013, 03:11 PM   #42
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just go back, lots of people have told you that if interest rates rise, bond funds will not go down, or if they do, not much, and anyway it won't matter whatever they do.

So who you gonna believe, us or your lying eyes?

Ha

And right after they tell you that rates don't matter to bond funds, they tell you to shorten the duration. lol
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Old 06-10-2013, 03:24 PM   #43
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just go back, lots of people have told you that if interest rates rise, bond funds will not go down, or if they do, not much, and anyway it won't matter whatever they do.

So who you gonna believe, us or your lying eyes?

Ha
LOL, well some of us have been saying been saying bonds are dangerous and are going to lose money for a while. Like a broken clock, I'm feeling vindicated to be right twice a decade.
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Old 06-10-2013, 03:46 PM   #44
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I have lost money with even 2-4 year duration bond funds over the last weeks, which of course was pretty much predictable, if indeed rates did go up.

Who knows what will happen with rates going forward-certainly not I. Jeff Gundlach, a pretty smart guy with much skin in it, thinks that the Federal Reserve will turn around and open the valve further if rates continue much higher.

The usually unmentioned thing is that portfolio theory suggests that if rates do indeed go up, logically, volatile no or low dividend stocks should be hit hardest, since they depend most on the come.

Ha
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Old 06-10-2013, 03:58 PM   #45
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Great question although it's not a slam dunk answer. The one part that is, however, is NOT, do it using mutual funds. That's a whole other topic but without getting too preachy funds simply underperform relative to their benchmarks and typically cost way too much.

With new cash/inflows we're not investing more than about 25% of our regular allocations at this point. If we get more of a correction we'll continue to nibble but if you're that close to retirement needs (income etc) the last thing you want to do is see it get rattled as we test new market highs.
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Old 06-10-2013, 05:12 PM   #46
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I have lost money with even 2-4 year duration bond funds over the last weeks, which of course was pretty much predictable, if indeed rates did go up.

Who knows what will happen with rates going forward-certainly not I. Jeff Gundlach, a pretty smart guy with much skin in it, thinks that the Federal Reserve will turn around and open the valve further if rates continue much higher.

The usually unmentioned thing is that portfolio theory suggests that if rates do indeed go up, logically, volatile no or low dividend stocks should be hit hardest, since they depend most on the come.

Ha
I would disagree with the open valve option to keep rates at present or lower. That would be a complete 180 from the Feds stated intentions of last week. My guess is that they let rates slip north to 4% on the ten year, with just enough pressure to make the ride as smooth as possible.
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Old 06-10-2013, 05:34 PM   #47
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I would disagree with the open valve option to keep rates at present or lower. That would be a complete 180 from the Feds stated intentions of last week. My guess is that they let rates slip north to 4% on the ten year, with just enough pressure to make the ride as smooth as possible.
Disagreements are what makes markets. I completely understand that my read on it is only a guess; I hope a good guess. IMO the fed would hemorrhage if they thought the treasury 10 year note might go to 4%. The 10 year is important to mortgage rates. According to today's WSJ, the treasury 10 year is yielding 2.16; a survey or banks shows the 30 year fixed mortgage at 4.15%. I don't know enough about mortgage finance to extrapolate what the 30 year fixed might be if the 10 year treasury note went to 4%-maybe 6%?

This would be like a stun gun pressed against the temple. Knockout, who's next!

IMO, they will not willingly go anywhere near 4%, and if we see 4%, it's because rates have escaped central control. I give it less than a 10% chance in one year period. I believe that 3-4 years duration bonds are risky, but less so than most stocks.

Ha
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