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Old 04-27-2020, 09:07 AM   #101
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Because it is likely that if you reinvest the proceeds in a bond of similar remaining term and credit quality that the yield will be lower than the yield that you were receiving on the bond that got called.
That is certainly true. I don't expect to get the 6.5% I was getting, but I was getting the 6.5% for quite a while. Now I have to find somewhere to put the cash.
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Old 04-27-2020, 09:28 AM   #102
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Thank you @oldshooter, my sentiments exactly. A little more than half way through Taleb's "Fooled By Randomness" Great read....can't help but think about monkeys and typewriters.
Yes. He is a very insightful guy, though a little tedious to read IMO because he works so hard at being acane and cute at the same time.

If you like Taleb and want more, "The Black Swan" is the next dose.

For a change of pace, try Richard Thaler's "Misbehaving." He shows us that the irrational behaviors that evolution has bred into us have a big effect on our investing decisions. Among them are the "endowment effect" and the loss aversion that leads to economically silly things like: "I'll sell it when it gets back up to where I bought it." The next dose of behavioral finance is Daniel Kahneman's "Thinking Fast and Slow."
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Old 04-27-2020, 12:24 PM   #103
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My comment: Your link is to an article at thinkadvisor.com by Mike Patton that states an "opinion" and not data. Data should carry more weight than opinions.

Here is a link to numerous charts of the historical data of recessions and yield curve. It is really up to people to make an opinion on this data. In the first chart in this link, the grey represents recessions and the line below the horizonal axis represents yield curve inversion. There were 2 false positives. However, 7 inversions = 7 recessions. Hence: 7 out of 9 inversions are pretty good odds. A baseball player getting 7 hits every 9 at bats will be a highly paid baseball player.

https://www.advisorperspectives.com/...d-yield-curves

I never make decisions on people's opinions unless it is someone I really know well and that someone have a good track record. I do not know who the author of your article is (Mike Patton) and I do not know what his track record is.

Do you know Mike Patton? What is his track record on his predictions?
Did you bother to look at the charts?

"We find that leading up to the 1990 recession, there was virtually no inversion in the yield curve.

Moreover, in last two recessions, there is an interesting trend.

In Charts II and III, we find the yield curve was inverted 12-months prior, but 30 days before each recession began, the slope was normal.

This trend was more drastic prior to the Great Recession of 2008."

So for the past several decades an inverted yield curve has not been a reliable predictor of a recession...it certainly isn't the reason we're in one now.
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Old 04-27-2020, 01:49 PM   #104
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I'm all set have 3 years cash, 650000 in stocks now bonds I want to open up a bond fun and add to it weekly the goal for the money is use it in 3 to 5 years, I'm stating with 10000. and will add 1000 a week. have 400000 in cash that I'll start moving in. What fund would you put in. I won the game long time ago. I have never had a bond fund. thanks
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Old 04-27-2020, 02:21 PM   #105
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While I would prefer to use one of the total bond funds I can't justify abandoning my CD ladder / corporate bond funds / mortgage funds etc combination. Even with lousy rates CD's are providing a significant yield advantage over treasuries which make up nearly 50% of the total bond funds. Since I don't sell funds long term it's the yield that provides the returns in my case.
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Old 04-28-2020, 03:01 PM   #106
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Did you bother to look at the charts?

"We find that leading up to the 1990 recession, there was virtually no inversion in the yield curve.
I am not going to argue simply because Mark Twain states:

Get your facts first...then you can distort them as you please.

Even if the recession does NOT come after the yield curve invert, I will continue to buy treasuries when this occur.

Why? Because when the yield curve inverts, this means the long term yields are declining below the short term yield. Since yield and prices goes in opposite direction, this means price of LT treasuries rises. Long term treasuries performances such as VUSUX will generally get double digit returns when the long term yield declines. I just like safe treasuries with reduced risk and good returns...regardless of whether there is a recession or not. If the current holdings of VUSUX have an aggregate coupon rate of 3.5% and the current LT treasuries yield drops below 2.5% because the yield curve inverted, then buying VUSUX is a pretty good deal to me.

If there is a recession without a yield curve inversion as you suggested, then I will be just like you and the rest of the average investors. There is nothing wrong with that situation. On the other hand, I do like that there were 7 recession out of the 9 yield curve inversions according to my link and first chart that I already posted.

Also...be careful what you read because Warren Buffet states:

"Let blockheads read what blockheads wrote."

For example, the net worth of Nassim Tabel is only a puny $2M according to the following link:

https://www.wealthypersons.com/nassi...rth-2020-2021/

I prefer reading books and adopting strategies by successful billionaire investors like Warren Buffet, Jeffrey Gundlach rather than Nassim Tabel or Mike Patton who are only "average" in acquiring wealth. Does NOT make sense for me to get financial advice from someone with a net worth that is lower than mine.

That is my personal preference and opinions. Other people also have their own personal preferences and opinions which I do respect...due to everybody's 1st amendment rights.
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Old 04-28-2020, 03:03 PM   #107
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Old 04-28-2020, 03:05 PM   #108
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bond fun
Said, no one, ever.
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Old 04-28-2020, 03:21 PM   #109
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.... I prefer reading books and adopting strategies by successful billionaire investors like Warren Buffet, Jeffrey Gundlach ...
Ok, then did you see this from yesterday... Gundlach doesn't sound very optimistic near-term:

Quote:
... "I'm certainly in the camp that we are not out of the woods. I think a retest of the low is very plausible," Gundlach said. "I think we'd take out the low."

Gundlach revealed he placed a short position on the S&P 500 at 2,863, saying he doesn't expect the index to reach 3,000 before falling further. ...
https://markets.businessinsider.com/...0-4-1029134463
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Old 04-28-2020, 03:27 PM   #110
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It is possible to disagree without being disagreeable
Too much of that going around. It used to be rare on this forum.
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Old 04-28-2020, 05:48 PM   #111
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Ok, then did you see this from yesterday... Gundlach doesn't sound very optimistic near-term:



https://markets.businessinsider.com/...0-4-1029134463

It was Jeffrey Gundlach (Bond King) who convinced me to change my 60/40 portfolio to 100% bonds....as well as the inverted yield curve in 2019. I called him my "free" financial advisor because I do not have to pay him for his advice.

Jeffrey Gundlach went from near $0 net worth to $2B net worth. This is more impressive than Warren Buffet who was originally a millionaire and Warren then became a billionaire.

His predictions are not 100% accurate but nobody can predict the future with 100% accuracy. However, his accurate predictions are pretty profound: (1) Predicted the 2007 crash, (2) Predicted Trump was going to win the 2016 election even before Trump won a single primary, (3) Predicted a 60% probability of a recession in 2019 or 2020, (4) Currently predicting that we will test the 19,173 lows and he has betted money on shorting the market. (5) Currently predicting that corporate bonds less than AAA are too risky due to over leveraging and that some BBB bond ratings of some companies should be rated junk. The government can't down grade BBB bonds to junk because that will create panic so the government regulators look the other way (sounds familiar). If corporations can't pay the interest on their bonds, this may cause bankruptcies and cause the market to test the lows. This is also why I am in treasuries and I do not have any corporate bonds.

I like him because he is the CEO of double line investment firm. If he is wrong, then the investors may abandon Double line and then he loses money. If he is right, then investors will flock to double line and he makes money. Since his net worth is $2B plus, he appears to be doing something right. This is probably due to his computer investment model and his analysts that he has on staff of a billion dollar investment firm. Other CEO of investment firms rarely predict anything while Jeffrey does. Generally you do not do what Jeffrey Gundlach is doing unless you have supreme confidence.
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Old 04-28-2020, 06:06 PM   #112
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Jeffrey Gundlach went from near $0 net worth to $2B net worth. This is more impressive than Warren Buffet who was originally a millionaire and Warren then became a billionaire.
I hope your "facts" about Gundlach are more accurate than your "facts" about Buffet.

How rich Warren Buffett was at your age

Quote:
After graduating college, Buffett worked for his father's brokerage firm as a stockbroker. When Buffett was 21, his net worth was shy of $20,000, reports Dividend.com.

At age 24, Buffett was offered a job by his mentor, Benjamin Graham, with an annual salary of $12,000. According to U.S. Census Bureau data, this was already about three times the annual median income for the average family in 1954 — proof that Buffett was well on his way to fortune. By the time Buffett reached 26, his net worth was $140,000.
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Old 04-29-2020, 09:26 AM   #113
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.when the yield curve inverts, this means the long term yields are declining below the short term yield. Since yield and prices goes in opposite direction, this means price of LT treasuries rises. Long term treasuries performances such as VUSUX will generally get double digit returns when the long term yield declines. I just like safe treasuries with reduced risk and good returns...regardless of whether there is a recession or not. If the current holdings of VUSUX have an aggregate coupon rate of 3.5% and the current LT treasuries yield drops below 2.5% because the yield curve inverted, then buying VUSUX is a pretty good deal to me.
I need to catch up on this thread...
Doesn't what you say require:
1) that you are able to front-run the situation, and buy into VUSEX before the NAV rises significantly. How much time does it take before half the rise has happened? At that time, is the risk-return ratio still favorable?

2) that you sell those appreciated shares, before the fund's continual purchase of low interest rate on-the-run bonds lowers the dividend and hence the NAV again. And know when to sell, not too soon, so you sell closer to the peak.

How long does this cycle of rise & fall take to play out?

A lot of people psychologically prefer having "a dividend in the bank" to trying to predict & time the theoretical future behavior that you describe. Gotta sleep at night.
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Old 04-29-2020, 11:19 AM   #114
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How much are people willing to go to cash reserves from bonds at this time? How much and why?
This thread has morphed to sort of include a track on "reasons to go from cash to bonds."

I think that opposite line would make a good thread on its own.
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Old 04-29-2020, 11:30 AM   #115
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I need to catch up on this thread...
Doesn't what you say require:
1) that you are able to front-run the situation, and buy into VUSEX before the NAV rises significantly. How much time does it take before half the rise has happened? At that time, is the risk-return ratio still favorable?

2) that you sell those appreciated shares, before the fund's continual purchase of low interest rate on-the-run bonds lowers the dividend and hence the NAV again. And know when to sell, not too soon, so you sell closer to the peak.

How long does this cycle of rise & fall take to play out?

A lot of people psychologically prefer having "a dividend in the bank" to trying to predict & time the theoretical future behavior that you describe. Gotta sleep at night.
Your questions imply that you are trying to time the performances of a treasuries bond fund precisely. This is difficult to do.

If the yield of LT treasuries starts to decline, this means more investors are buying LT treasuries. It takes time to drop below the yield of ST treasuries and there are times when it doesn't. However, when it does, this is a significant event. This is because it means a whole bunch of investors believe equities are becoming a higher risk. (i.e. a recession is becoming more likely in the minds of these investors) They are taking money from equities and into treasuries to reduce the risk in their portfolios. I did the same thing but I took it to an extreme case (60/40 to 100% treasuries) because of my age.

When money flow into equities, the price of equities tend to rise. When money starts to flow to treasuries, the price of treasuries tend to rise. When the price of treasuries rises, the yield decline. I like to invest where the money is going...not where the money is leaving.

I know this is a generalization and does not specifically answer your questions but I think in making strategic moves and not incremental timing moves. Changing my 60/40 portfolio to 100% treasuries was the correct strategic move because Jeffrey Gundlach had recommended that investors should go into a capital preservation mode. That is precisely what I did after the yield curve inverted without worrying about risk-return ratios, NAV prices, the time it takes before half the rise happen. My primary goal was to preserve my portfolio and making money was a secondary goal.

VUSUX minimum buy-in is $50,000. However there is a similar VUSTX with a minimum buy-in of $3,000 but with higher expense ratio. There is nothing wrong with investing $3,000 in LT treasuries (10 year annual return is 8.7%) to learn how LT treasuries work during this bear market and during the next bull market. Doing so may answer your specific questions. There is no substitute for first hand knowledge and actual experience. Once you get this knowledge and experience, you will sleep better at night.
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Old 04-29-2020, 05:34 PM   #116
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I hope your "facts" about Gundlach are more accurate than your "facts" about Buffet.

How rich Warren Buffett was at your age

Thanks for the correction. I think I may have co-mingled his father's net worth with his.

Gundlach's father was a chemist. His family struggled financially. Gundlach graduated in Math and Philosophy. He then became a drummer in a band.

https://www.aol.com/article/finance/...5sVhi63iEArYEv

Warrent Buffet's father was a Congressman. This translate to upper or at least upper middle class. Buffet graduated in Business Administration and Economics.

https://en.wikipedia.org/wiki/Warren..._and_education

In other words, Warren Buffet lived a privileged life and he had a head start.

In any case, I follow both of them simply because they know what they are doing. Both of them put money where their mouth is. They win more than they lose. People will pay $1M+ just to have lunch with Warren Buffet so they can pick his brain. Lesser known people who write books are less likely to get people to pay $1M+ to pick their brain.

Jeffrey Gundlach just helped me missed the 2020 crash with his wisdom. If you pick the right person to take financial advise from, positive things tend to happen.

Jeffrey Gundlach is shorting the market and betting that we will test the lows. Warren Buffet has increased his cash position but Warren is less vocal. However, increasing a cash position in a portfolio speaks volumes. They are not always right but I do pay attention to these things.
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Old 04-29-2020, 05:46 PM   #117
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Buffett:
"I never have the faintest idea what the stock market is going to do in the next six months, or the next year, or the next two."

“The only value of stock forecasters is to make fortune-tellers look good."
Courtesy of Taylor Larimore's excellent compilation of market timing quotes: https://www.bogleheads.org/wiki/Tayl..._timing_quotes
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Old 04-29-2020, 05:51 PM   #118
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I don't know the answer to this, but how much of Gundlach's fortune is from his investments vs. the money he's made managing other people's money? Many fund managers make most of their money off the management fees of their investors. Personally I can't see any way you can start with a few thousand dollars and parley that into billions, just through investing. Especially in bonds. But I'm no expert, just an average saver/investor.

Being a drummer in a band doesn't have anything to do with anything. I bet there are hundreds of people on this board that have played in bands, including me. It's just something you do, not an indication of how much money you have. I can pretty much guarantee he had day jobs, and didn't become a billionaire off his earnings as a drummer. And you also don't get a job in finance because of being a good drummer. So there's some missing information.

Having said that, he's obviously done well, and may very well be someone to emulate. But I bet he did something like becoming an investment banker or something, started getting paid millions of dollars/year, then started a fund. He's definitely done well with his fund. But there had to be something major that went on between drumming and managing a fund.

Edit: There are tons of people that have tried to invest like Buffett, Gross, Lynch, Templeton, etc. I haven't heard of any that succeeded. Those guys tend to keep their secrets close to the chest. By the time you hear about it, it's not a tip anymore.
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Old 04-29-2020, 07:17 PM   #119
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For example, the net worth of Nassim Tabel is only a puny $2M according to the following link:

https://www.wealthypersons.com/nassi...rth-2020-2021/

More bad information. Taleb has nothing to do with giving market predictions in fooled by randomness. Just the opposite actually pointing out the hidden role of chance and uncertainty. If you actually had something useful to say that wasn't just empty conjecture you may get more respect around here.
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Old 04-30-2020, 11:16 PM   #120
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Buffett:
"I never have the faintest idea what the stock market is going to do in the next six months, or the next year, or the next two."

“The only value of stock forecasters is to make fortune-tellers look good."
Courtesy of Taylor Larimore's excellent compilation of market timing quotes: https://www.bogleheads.org/wiki/Tayl..._timing_quotes

Whatever.

FYI. I decided to short the market by buying shares of RYURX on my non-IRA Etrade account. This is because Jeffrey Gundlach has announced that he is shorting the market and Warren Buffet has increased his cash position.

The S&P500 is way too high in my opinion with the large unemployment applications and the shelter in place is causing some long term economic damage. I also read that Wuhan has opened their economy but people are still scared and there is no bounce in China's economy. Once USA opens up their economy I expect something similar. When investors realizes that we are in a recession, the market will decline. At that point, I will sell my shares of RYURX and make a profit.

I put money to back up what I believe in. This is how I missed the bear market by reallocating from 60/40 to 100% treasuries in 2019. VUSUX's 1st quarter 2020 return is +20% during the crash and I am one of the few people who is making money during this bear market with treasuries in my IRA. Treasuries were also recommended by Jeffrey Gundlach in 2019.

I am a gambler by nature and I do this to make my life more exciting. We will see what happens next.
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