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Re: investments a bear would love
Old 01-10-2005, 05:25 PM   #21
 
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Re: investments a bear would love

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Is there a gotcha?
The security closing date of the one I was looking at was 1/08/05. :-/
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Re: investments a bear would love
Old 01-10-2005, 05:31 PM   #22
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Re: investments a bear would love

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Is there a gotcha?
Charlie
Not sure if would rank as a gotcha, but based only on what you have written, the arithmetic of this security is odd. At low rates of CPI inflation, it pays a small real return. If CPI inflation should get very high, then the real return will be substantial.

For example, if CPI inflation is 1%, this security would pay 1.5%, or a real return of 0.5%. OTOH, if CPI inflation were to reach 10%, it would pay 15%, or a real 5%.

Sounds like a great way to play hyperinflation, not so good for low or moderate inflation rates.

Mikey
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Re: investments a bear would love
Old 01-10-2005, 05:38 PM   #23
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Re: investments a bear would love

I've got a small lump of the vanguard high yield, and I sure like the dividend checks it throws off. From what i've gathered, the experts dont feel like the 'spread' between investment grade and high yields warrants the risk of high yields, but the vanguard fund isnt anywhere near as risky as many high yield funds.

Its tempting, but I have this queasy feeling about bond navs right now. Just read some stuff from bill gross and company that said navs have been surprisingly steady in the face of the rate increases, but that the fat lady hasnt sung yet (nor can you drink her thin).

On STON it seems like I've heard the story about it being a slam dunk that everyones gonna die. Its kind of a cut-throat (sorry) business though, and the 'market leaders' seem to change up every now and then. I do hear that people are dying to own the stock though

Chuck - ibonds are tempting, and if I thought inflation was going to pop I'd buy them. Looks like I can get an extra 1.4-1.5% on a CD with roughly the same penalty to back out (3 months of 3.6% vs 6 months of 5-5.25%) if rates improve.

Bob - I wasnt aware that tips were yielding so poorly. I thought they were iffy at 2.5%. I couldnt be any less interested in owning them now. If the rates topped 3%, I'd think about it. At 4% I'd buy a truckload. I just really hate the idea of having to pay taxes for the inflation adjustments every year and not seeing it for 20. On tips I think Bob has the right idea in buying the old high coupon ones. My bargain shopping nature keeps me from biting on that one though.

It really, really sucks that CD's might be the best thing for the next 1-3 years.

Anyone looking at EE bonds? Supposedly in a rising rate, tame inflation environment they're the thing to have.

Sorry for those on a long investment string, but I'd love to see everything just go to hell in a handbasket pretty soon and make at least 2-3 options look good.
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Re: investments a bear would love
Old 01-10-2005, 05:50 PM   #24
 
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Re: investments a bear would love

Everything will go "to hell in a handbasket". Just be
patient.

Interesting how the rates have stayed so low. I thought maybe once the fed started to move back up
everything would turn. Didn't happen. I read today
that mortgage rates have even dropped.

Tomorrow I am buying a 20K CD at a local bank.
2.75% for 9 months on money I borrowed at -0- %.
That's easy money.

JG

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Re: investments a bear would love
Old 01-10-2005, 06:04 PM   #25
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Re: investments a bear would love

Mikey,

Thanks for commenting. I just finished reading
the prospectus ........ yes the return could be 0%
if year over year inflation is 0 or negative.
Right now inflation is 3.52% so this security
would be paying 5.28%. The first year interest
rate of 7.5% is tempting.

I guess the big risk would be a long period of
depression with 0% return.

OTOH does anybody really think we will have a
long period of no inflation? I don't think gov
policy would permit that. I think the long term
average inflation has been around 3% ..... but
this says noting about the future.

Like you said, it would be a good hyper inflation
hedge.

Cut, I don't know if it is too late on this. The
settlement date is Jan 13th on the prospectus.
Maybe they didn't sell out?

Well, good night all zzzzzzzzzzzzz

Charlie
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Re: investments a bear would love
Old 01-10-2005, 07:23 PM   #26
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Re: investments a bear would love

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I just really hate the idea of having to pay taxes for the inflation adjustments every year and not seeing it for 20.
Yep, I wouldn't own them outside a tax deferred account. Although I'm looking forward to my first full year in ER. I'm expecting to be in John Galt's tax bracket - zero.
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Re: investments a bear would love
Old 01-11-2005, 04:33 AM   #27
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Re: investments a bear would love

I have TIPS in my 401(k) and given our tax situation I also don't want to buy in a taxable account. Thinking about I bonds and CDs but not really sure yet. EEbonds are paying 3.25% right now. The nice thing about these bonds is no taxes until you cash them in. We do have some old EEbonds that are at a 4% guaranteed rate.

While I look at these conservative investments, my spouse again talks more metals and currency plays. Scary to me.
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Re: investments a bear would love
Old 01-11-2005, 05:16 AM   #28
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Re: investments a bear would love

Quote:
Loomis Sayles Bond Funds, if your bond portfolio isn't diverse enough yet.

For retail investors:

LSBRX
LSGLX

As soon as I saw the word "global" as part of these bond funds, I forwarded your suggestion to my husband to look at. Thanks for the idea.
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Re: investments a bear would love
Old 01-11-2005, 05:43 AM   #29
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Re: investments a bear would love

? Being left handed - and a Boglehead - park in Vanguard Retirement Series- Income and wait.
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Re: investments a bear would love
Old 01-11-2005, 06:00 AM   #30
 
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Re: investments a bear would love

Her husband talks metals and currency plays,
planning that Martha finds scary.
Looking to ER she's still off a ways.
She should tell him about the tooth fairy.

JG
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Re: investments a bear would love
Old 01-11-2005, 09:42 AM   #31
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Re: investments a bear would love

Hi Martha_M,
IF you qualify as an accredited investor you may want to check out Interactivebrokers.com. They have pretty low commission and you can buy about anything in the account (stocks, bonds, options, foreign investments, etc); but, they also issue some bonds themself. They pay 8% annualized and have a 15 month maturity, but they can be called in 3 months and they intend to do so. They have done this for the last 3 years, as a means of offering a short-term higher return option for there customers. They do charge a $1 per thousand commission, which will lower your yield somewhat. They are not insured and not registered with SEC (thus you have to be accredited investor) so do your homework, but there financials look pretty good to me.
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Old 01-11-2005, 04:08 PM   #32
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Re: investments a bear would love
Old 01-12-2005, 04:21 AM   #33
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Re: investments a bear would love

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? Being left handed - and a Boglehead - park in Vanguard Retirement Series- Income and wait.
I totally agree with your commnet and that specific fund.
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Re: investments a bear would love
Old 01-12-2005, 12:16 PM   #34
 
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Re: investments a bear would love

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? Being left handed - and a Boglehead - park in Vanguard Retirement Series- Income and wait.
You know Unclemick, I think this is a great idea. I think I'm gonna forget all about CDs and do this instead.

After I dip this toe in the water, I may just go whole hog with my stock porfoilo into one of their stock retirement funds. - And then do nothing - Except catch fish.
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Re: investments a bear would love
Old 01-13-2005, 09:02 AM   #35
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Re: investments a bear would love

Well, I just made a big step for me in my IRA
bond allocation.

I bought a floating rate CD on the secondary market
that matures on 6/03/2014. The price was 101.3.
After commission and accrued interest, the total
cost was $101,387.67.

The good news is that the "floater" pays 2% + CPI
or about 5.52% right now. The real rate on 10
year TIPS is about 1.7% ..... so I am happy!

This brings my TIPS equivalent to about 25% of my
IRA ..... same as Vanguard's Target Retirement
Income fund. I hope they have it right.

1.98% real yield is a damn sight better than the current
1.22% real that Vanguard is paying on their fund
for equivalent maturity.

I like the "floater" concept because it pays the interest
up front. Downside vs TIPS is that in 9 years at maturity my CD will have depreciated in real value.

Oh well, I like to eat dessert first!

Cheers,

Charlie
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