Moving from short- to long-duration bonds

[COcheesehead]

So I don't think there's tons of money waiting to jump into the bond market...but who knows maybe there is this time.
.

As reported on March 1, the largest fund inflows were into money markets. Lots of cash sitting on the sidelines.

 

[Montecfo]

The point I was making was that when it happens it may very well be on a news release.

Stocks and bonds will both rally, and there will be no time to "lock in" the best bond yields.

There is a lot of money ready to rush in as we saw in Jan/Feb.

 

[Montecfo]

It's almost impossible to time this and somehow buy at the peak. But if you look at historical charts the peaks are more or less balanced on the left side and the right side. It goes down the same speed it goes up. So I don't think there's tons of money waiting to jump into the bond market...but who knows maybe there is this time.

Best case would be as you mentioned unemployment driving the pivot. But I also fear something like a banking collapse driven by home and auto loan defaults. If that happens rates will fall real fast.

Banks and the consumer are both in tremendous shape. I can usually find things to worry about but banking collapse driven by mortgage defaults or auto loans seems unlikely, at least right now.

Having said that, there is a definite uptick in loan auto loan defaults that is I think an indicator of a slowing economy and loss of government largesse that made some of them possible.

Needs to happen.

 

[COcheesehead]

Banks and the consumer are both in tremendous shape. I can usually find things to worry about but banking collapse driven by mortgage defaults or auto loans seems unlikely, at least right now.

Having said that, there is a definite uptick in loan auto loan defaults that is I think an indicator of a slowing economy and loss of government largesse that made some of them possible.

Needs to happen.

We aren’t big on going to malls, but yesterday found ourselves in one to buy some shoes. It was packed.

 

[Montecfo]

We aren’t big on going to malls, but yesterday found ourselves in one to buy some shoes. It was packed.

It is hard to draw conclusions from individual experiences. But obviously the economy is still growing, though the rate has slowed dramatically.

Somebody else said Hey, I was in Vegas, plane full, casinos packed. Well travel/leisure and in particular casinos and gaming is the strongest part of the economy, with a lot of well heeled folks still seeking experiences deferred during the pandemic and its fallout.

There is lots of actual data out there and it paints a mixed picture of the economy. Which is typical for an economy in transition.

 

[audreyh1]

Banks and the consumer are both in tremendous shape. I can usually find things to worry about but banking collapse driven by mortgage defaults or auto loans seems unlikely, at least right now.

Having said that, there is a definite uptick in loan auto loan defaults that is I think an indicator of a slowing economy and loss of government largesse that made some of them possible.

Needs to happen.

Agreed. This is way different from 2008 and the aftermath.

The labor market strength means the Fed has to work harder/tougher but at the same time seems like it protects the economy from the worst type of slowdown.

 

[copyright1997reloaded]

Agreed. This is way different from 2008 and the aftermath.

The labor market strength means the Fed has to work harder/tougher but at the same time seems like it protects the economy from the worst type of slowdown.

The better (IMHO) question is whether this is way different than late 2007. I was there, in the workforce, "south of canal street". I distinctly remember talking to others who were so excited about all the money that were making in real estate (leveraged), even though rates had been moving up. "The market is just pausing".

A year later was a vastly different. It too was "fascinating" to watch (up close as I was peripherally involved in some of the action) institutions like Lehman, Bear Sterns, AIG, WaMu, and others either fail or sell out for pennies on the dollar due to their exposures. Washington Mutual, in a heartbeat went from being feared (by traditional B&M megabanks) due to their (WaMu) non-traditional approach to retail banking to...bankrupt and having to be taken over by JP Morgan Chase.

Is it the same as then? No, I am not saying that it is. But we will only know where things fall out in retrospect...and for SURE at that time (before the proverbial feces hit the fan) the vastly predominant opinion was that things were great.

 

[target2019]

My cereal bowl this morning revealed a Cheerios plot going to 6% this year.

 

[pb4uski]

The only thing that I don't have sorted out in my mind is if/when we again have a normal yield curve how long will my ladder be? 3 years seems to short. 10 years seems too long.

 

[Montecfo]

The only thing that I don't have sorted out in my mind is if/when we again have a normal yield curve how long will my ladder be? 3 years seems to short. 10 years seems too long.

I have settled on 8, but some of the lower rungs are fatter than the upper rungs. I will be evening those out.

Also, I have some additional money I plan to move from equities to debt if we get a move much over 6% for high quality debt.

Dubious of that but....

 

[COcheesehead]

I have settled on 8, but some of the lower rungs are fatter than the upper rungs. I will be evening those out.

Also, I have some additional money I plan to move from equities to debt if we get a move much over 6% for high quality debt.

Dubious of that but....

I liability match to bridge me to SS at 70. So I am out 9 years. More or less even rungs, but what is happening is I reinvest on the long end mostly so the last rung is getting bigger.